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Translated from the Second German Edltio. by N. I. STONF, 

Wuhan Appendix Containing Marx s Introduction to the Critique 
Recently Published among His Posthumous Paper 



Copyright, 1904 
By the International Library Publishing Co. 



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:nt : r rY OF 


The present translation has been made from the sec 
ond edition of the "Zur Kritik der Politischen Oekon- 
omie/ published by Karl Kautsky in 1897 with slight 
changes from the original edition of 1859 ; changes that 
had been indicated by Marx on the margins of his own 
copy of the book. 

As will be seen from the authors preface, the work 
was originally issued as the first instalment of a com 
plete treatise of political economy. As he went on 
with his work, however, Marx modified his plans and 
eight years after the appearance of the "Zur Kritik" 
he published the first volume of his Capital, whose scope 
was intended to cover the entire field of political 

The plan to which Marx alludes in the preface to 
the present work was thus abandoned in its formal as 
pects, but not in substance. The subject matter treated 
here was reproduced or rather "summarized," as Marx 
himself puts it, in Capital. But that was done in so 
far as was necessary to secure continuity of treatment. 
On the other hand, many important matters are treated 
here more thoroughly than in Capital, especially the part 
devoted to the discussion of money. This, as well as 
the chapters on the history of the theories of value and 

of money, which do not appear in Capital, make "Zur 
Kritik" a work practically complete in itself. 

The recent silver agitation in this country shows how 
timely and useful this work still is, though written nearly 
half a century ago. That a great part of the working- 
men employed in the cities were not carried away by 
the Democratic-Populist agitation in 1896 and 1900 is 
probably due in a greater measure than is commonly 
realized to the direct and indirect influence of Marx, 
whose economic teachings guided the socialists in their 
counter agitation. And since the conditions which once 
gave rise to a demand for an inflated currency have by 
no means disappeared beyond a possibility of return, 
this book has a wide field before it, outside of the library 
of the college and of the student of economics, which 
the author s name and prestige with the working class 
insures for it. 

There is another reason, if any need be given why 
this book should have been translated into English. 
Marx s preface to the present work contains the classic 
formulation of his historico-philosophic theory known as 
the Materialistic Interpretation of History. This the 
ory, which until recently was entertained almost exclu 
sively by socialist writers and was hardly heard of out 
side of socialist circles in English speaking countries, 
is at last receiving not only due recognition but sym 
pathetic appreciation at the hands of men of science. 1 
It is rather a significant coincidence that the work 

1 Cf . Seligman, "The Economic Interpretation of History. 
VncMillan. 1002. 

which for the first time clearly formulated the law gov 
erning social evolution should have seen the light of 
day in the same year in which Darwin gave to the world 
his theory of organic evolution. And as the latter had 
to fight its way to recognition in the teeth of religious 
prejudices, so has the recognition of the former been 
retarded by even more powerful social and political 

The Introduction to the Critique of Political Econ 
omy which is added as a supplement to this book is for 
the first time published in book form in any language. 
It was written by Marx in 1857, but for reasons ex 
plained by him in the preface was not published and in 
fact was never finished by him, since according to his 
changed plans it would have fitted more into the last 
volume of Capital which was to contain a history of 
political economy. The introduction has been published 
but lately in the form of a magazine article by Karl 
Kautsky, editor of the Neue Zeit and literary executor 
of Karl Marx. 

A few explanations are here in order with reference 
to the work of translation. No one is more keenly alive 
to the shortcomings of the English rendering of the 
original than the translator himself. While fully con 
scious that the translation might be greatly improved, 
he has at times deliberately sacrificed literary finish to 
closeness to the original. It will be found that many 
passages have been rendered more clear and concise in 
Capital in which, according to Marx s own statement in 
the preface to that work, they were much simplified 
and popularized. The Hegelian phraseology is more in 

evidence in the present work rendering translation a 
more difficult task. Yet for that very reason it seemed 
particularly desirable to give to English speaking read 
ers as close a version of the original as was possible. Tn 
(he few cases where certain passages from this work 
were reproduced by Marx in Capital, the translation of 
the latter by Moore and Aveling was freely drawn upon 
with slight modifications here and there. 

About the only liberty taken with Marx s terminology 
has been in the case of the word "biirgerlich." Marx 
speaks here of "biirgerliche Produktion" and "biirger- 
licher Reichthum" and "biirgerliche Arbeit" where eight 
years later he used in corresponding passages in Capital 
the word "kapitalistische." As the English speaking 
reader is more accustomed to hear of the "capitalist" 
system of production than of the "bourgeois" system of 
production, etc., the translator considered Marx s own 
change of this term within a few years from the publi 
cation of "Zur Kritik" a sufficient justification for ren 
dering the word "biirgerlich" into "capitalistic" wher 
ever it seemed more likely to carry the meaning home to 
the reader. 

In view of the fact that the work is likely to be read 
in wide circles it was thought desirable to translate the 
numerous quotations from Italian, Greek, Latin and 
French writers, the translation being given side by side 
with the original quotation. All English citations given 
by Marx in German have been restored from the original 
sources, which necessitated the use of four libraries, the 
Astor and the Columbia University libraries in New 
York, the Congressional Library in Washington, and 

the private library of Professor Seligman to whose kind 
ness the translator is indebted for the permission to use 
rare works of the seventeenth century quoted by Marx. 
Several of Marx s references to the pages of the books 
quoted by him have been found to be wrong and there 
fore differ here from those given in the original. In 
two or three cases where the original English citations 
could not be found they were retranslated from German 
with the quotation marks omitted. 

This statement would be incomplete if the translator 
failed to mentioi the helpful participation in this work 
by his wife whose share in the translation is equal to 
hi? own. 

NEW YORK, October, 1903. 


I consider the system of bourgeois economy in the fol- 
Jowing order: Capital, landed property, wage labor; 
ttate, foreign trade, world market. Under the first three 
heads I examine the conditions of the economic existence 
of the three great classes, which make up modern bour 
geois society; the connection of the three remaining 
heads is self evident. The first part of the first book, 
treating of capital, consists of the following chapters: 
1. Commodity; 2. Money, or simple circulation; 3. 
Capital in general. The first two chapters form the 
contents of the present work. The entire material lies 
before me in the form of monographs, written at long 
intervals not for publication, but for the purpose of 
clearing up those questions to myself, and their sys 
tematic elaboration on the plan outlined above will de 
pend upon circumstances. 

I omit a general introduction which I had prepared, 
as on second thought any anticipation of results that 
are still to be proven, seemed to me objectionable, and 
the reader who wishes to follow me at all, must make 
up his mind to pass from the special to the general. 


On the other hand, some remarks as to the course of 
my own politico-economic studies may be in place here. 

The subject of my professional studies was jurispru 
dence, which I pursued, however, in connection with and 
as secondary to the studies of philosophy and history. 
In 1842-43, as editor of the "Rheinische Zeitung," 1 
found myself embarrassed at first when 1 had to take 
part in discussions concerning so-called material in 
terests. The proceedings of the Rhine Diet in 
connection with forest thefts and the extreme sub 
division of landed property; the official controversy 
About the condition of the Mosel peasants into which 
Herr von Schaper, at that time president of the Rhine 
Province, entered with the "Rheinische Zeitung ;" finally, 
the debates on free trade and protection, gave me the 
first impulse to take up the study of economic questions. 
At the same time a weak, quasi-philosophic echo of 
French socialism and communism made itself heard in 
the "Rheinische Zeitung" in those days when the good 
intentions "to go ahead" greatly outweighed knowledge 
of facts. I declared myself against such botching, but 
had to admit at once in a controversy with the 
"Allgemeine Augsburger Zeitung" that my previous 
studies did not allow me to hazard an independent judg 
ment as to the merits of the French schools. When, 
therefore, the publishers of the "Rheinische Zeitung" 
conceived the illusion that by a less aggressive policy 
the paper could be saved from the death sentence pro 
nounced upon it, I was glad to grasp that opportunity 
to retire to my study room from public life. 

The first work undertaken for the solution of the 


question that troubled me, was a critical revision of 
Hegel s "Philosophy of Law"; the introduction to that 
work appeared in the "Deutsch-Franzosische Jahr- 
biicher," published in Paris in 1844. I was led by my 
studies to the conclusion that legal relations as well as 
forms of state could neither be understood by themselves, 
nor explained by the so-called general progress of the 
human jnind, but that they are rod ed in the material 
conditions of life, which are summed up by Hegel after 
the fashion of the English and French of the eighteenth 
century under the name "civic society;" the anatomy 
of that civic society is to be sought in political economy^ 
The study of the latter which I had taken up in Paris, 
I continued at Brussels whither I emigrated on account 
of an order of expulsion issued by Mr. Guizot. The 
general conclusion at which I arrived and which, once ~~ 
reached, continued to serve as the leading thread in my 
studies, may be briefly summed up as followsyr In thej 
pocial production which men carry on theyXmter into 
definite relations that are indispensable and independent 
of their will; these relations of production correspond 
to a definite stage of development of their material pow 
ers of production. The sum total of these relations of 
production constitutes the economic structure of society 
the real foundation, on which rise legal and political 
superstructures and to which correspond definite forms 
of social consciousness. The mpde_Qf_ production in 
material life determines the general character ofjthe > 
pocial, political and spiritual processeg_ojjife. It is not \\ 
the consciousness of men that determines their existence, ; \ 
but, on the contrary, their social existence determines 



, their consciousness^ At a certain stage of their develop 
ment, h~e~ materiaiiorccs of production in society come 
in conflict with the existing relations of production, or 
what is but a legal expression for the same thing 
with the property relations within which they had been 
at work before. From forms of development of the 
force? of production these relations turn into their fet 
ters. Then comes hie period of social revolution. /With 
the change of the economic foundation the entire im 
mense superstructure is more or less rapidly trans 
formed. In considering such transformations the dis 
tinction should always be made between the material 
transformation of the economic conditions of produc 
tion which can be determined with the precision of nat 
ural science, and the legal, political, religious, aesthetic 
or philosophic in short ideological forms in which men 
become conscious of this conflict and fight it out. Just 
as our opinion of an individual is not based on what 
he thinks pf himself, so can we not judge of such a 
period of transformation by its own consciousness; on 
the contrary, this consciousness must rather be ex 
plained from the contradictions of material life, from 
the existing conflict between the social forces of produc 
tion and the relations of production. No social order 
ever disappears before all the productive forces, for 
which there is room in it, have been developed ; and new 
higher relations of production never appear before the 
material conditions of their existence have matured 
i in the womb of the old society. Therefore, mankind 
[ njwavs takes tip only such problems as it can solve jj 
since, looking at the matter more closely, we will always 


find that the problem itself arises only when the material 
conditions necessary for its solution already exist or 
are at least in the process of formation. In broad out 
lines we can designate the Asiatic, the ancient, the feudal, 
and the modern bourgeois methods of production as so 
many epochs in the progress of the economic formation of 
society. The bourgeois relations of production are the 
last antagonistic form of the social process of production 
antagonistic not in the sense of individual antagonism, 
but of one arising from conditions surrounding the life 
of individuals in society; at the same time the produc 
tive forces developing in the womb of bourgeois society 
create the material conditions for the solution of that 
antagonism. This social formation constitutes, there 
fore, the closing chapter of the prehistoric stage of 
human society. 

Frederick Engels, with whom I was continually cor 
responding and exchanging ideas since the appearance 
of his ingenious critical essay on economic categories 
(in the "Deutsch-Franzosische Jahrbiicher"), came 
by a different road to the same conclusions as my 
self (see his "Condition of the Working Classes in Eng 
land"). When he, too, settled in Brussels in the spring 
of 1845, we decided to work out together the contrast 
between our view and the idealism of the German 
philosophy, in fact to settle our accounts with our former 
philosophic conscience. The plan was carried out in 
the form of a criticism of the post-Hegelian philosophy. 
The manuscript in two solid octavo volumes had long 
reached the publisher in Westphalia, when we received 
information that conditions had so changed as not to 
allow of its publication. We abandoned the manuscript 


to the stinging criticism of the mice the more readily 
since we had accomplished our main purpose the clear 
ing up of the question to ourselves. Of the scattered 
writings on various subjects in which we presented our 
views to the public at that time, I recall only the "Mani 
festo of the Communist Party" written by Engels and 
myself, and the "Discourse on Free Trade" written by 
myself. The leading points of our theory were first pre 
sented scientifically, though in a polemic form, in my 
"Misere de la Philosophic, etc. v directed against Proud- 
lion and published in 1847. An essay on "Wage Labor, 
written by me in German, and in which I put together 
my lectures on the subject delivered before the German 
Workmen s Club at Brussels, was prevented from leav 
ing the hands of the printer by the February revolution 
and my expulsion from Belgium which followed it as a 

The publication of the "Neue Rheinische Zeitung" 
in 1848 and 1849, and the events which took place later 
on, interrupted my economic studies which I could not 
resume before 1850 in London. The enormous material 
on the history of political economy which is accumulated 
in the British Museum ; the favorable view which Lon 
don offers for the observation of bourgeois society ; 
finally, the new stage of development upon which the 
latter seemed to have entered with the discovery of gold 
in California and Australia, led me to the decision to 
resume my studies from the very beginning and work 
up critically the new material. These studies partly 
led to what might seem side questions, over which I 
nevertheless had to stop for longer or shorter periods of 

15 . 

time. Especially was the time at my disposal cut down 
by the imperative necessity oi working for a living. My 
work as contributor on the leading Anglo-American 
newspaper, the "New York Tribune," at which I have 
now been engaged for eight years, has caused very great 
interruption in my studies, since I engage in newspaper 
work proper only occasionally. Yet articles on important 
economic events in England and on the continent have 
formed so large a part of my contributions that I have 
been obliged to make myself familiar with practical 
details which lie outside the proper sphere of political 

This account of the course of my studies in political 
economy is simply to prove that my views, whatever one 
may think of them, and no matter how little they agree 
with the interested prejudices of the ruling classes, are 
the result of many years of conscientious research. At 
the entrance to science, however, the same requirement 
must be put as at the entrance to hell: 

Qui si convien lasciare ogni sospetto 
Ogni vilta convien che qui sia morta. 

London, January, 1859. 



Translator s Preface 3 

Author* Preface 9 


Chaptei. I. Commodities 19- 

A. Notes on the History of the Theory of Value 56 . 

Chapt II. Money or Simple Circulation 73 - 

1. The Measure of Value 74 - *tJ^ 

* Theories of the Unit of Measure of Money 91 

2. The Medium of Circulation 107 

V; a. The Metamorphosis of Commodities 108 

* b. The Circulation of Money 125 

c. Coin and Symbols of Value 138 

3. Money 162 

a. Hoarding 166 

b. Means of Payment 185 

c. World Money 201 

4. The Precious Metals 208 

- C. Theories of the Medium of Circulation and of 

Money 215 

Appendix. Introduction to the Critique of Political 

Economy 264 -f 

1. Production in General 265 ^ -. 

2. The General Relation of Production to Dis 

tribution, Exchange, and Consumption 274 / j 

* 3^.The Method of Political Economy 29? 

"^V^-JProduction, Means of Production, and Con 
ditions of Production 306 / 

Index . 313 




At first sight the wealth of society under the capitalist 
system presents itself as an immense accumulation of 
commodities, its unit being a single commodity. But 
every commodity has a twofold aspect, that of -use 

A commodity is first of all, in the language of English 

1 Aristotle, d. Rep. L. 1, c. 9 (edit. I Bekkeri Oxonii, 1837) . 

cxavrov yap (crq^arof Strrii tj XPI"? f<rriv...i) ft.iv oiicct a, 17 f OVK oixet* T 
*pay fiarof ,oIoK vwoJq/iaTof rj re ii<roJT]irtf <cal ij /ifra/SArjTiioj. \nifiaTepai yap viro- 
ji^xarot xpojcrm; <rai yap aAAaTTo/nfi-cK TI <fo/xcV<i> uiroiij^iaTo? drri yo^V|tuiTf 
^ rp^)j< ^PTJTI Tti viroj^art jj VWO&-/JHCL, aAA ou T>)c otKCtac jfp^air- oi yip dAA - 
yq? CfrKty ytyOFfi . Toy avrbc &* rpovor "\ i Kai Trtpt TUV aAAwr KTtjfiaTwv." 

( Of everything which we possess there are two uses: one 
is the proper, and the other the improper or secondary use of 
it. For example, a shoe is used for wear, and ia used for ex 
change; both are uses of the shoe. He who gives a shoe in 
exchange for money or food to him who wants one, does indeed 
use the shoe as a shoe, but this is not its proper or primary 
purpose, for a shoe is not made to be an object of barter. The 
same may be said of all possessions." The Politics of Aria- 
totle, translated into English by B. Jowett, Oxford, 1885, 
T. L, p. 16.) 


economists, "any thing necessary, useful or pleasant iu 
life," an object of human wants, a means of existence in 
the broadest sense of the word. This property of com 
modities to serve as use-values coincides with their 
natural palpable existence. Wheat e. g. is a distinct 
use-value differing from the use-values cotton, glass, 
paper, etc. Use-value has a value only in use and is 
realized only in the process of consumption. The same 
use-value may be utilized in various ways. But the ex 
tent of its possible applications is circumscribed by its 
distinct properties. Furthermore, it is thus limited 
not only qualitatively but also quantitatively. Accord 
ing to their natural properties the various use-values 
have different measures, such as a bushel of wheat, a 
quire of paper, a yard of linen, etc. 

Whatever the social form of wealth may be, use- 
values always have a substance of their own, in 
dependent of that form. One can not tell by the 
taste of wheat whether it has been raised by a 
Russian serf, a French peasant, or an English 
capitalist. Although the object of social wants and, 
therefore, mutually connected in society, use-values do 
not bear any marks of the relations of social production. 
Suppose, we have a commodity whose use-value is that of 
a diamond. We can not tell by looking at the diamond 
that it is a commodity. When it serves as a use-value, 
aesthetic or mechanical, on the breast of a harlot, or in 
the hand of a glasscutter, it is a diamond and not a com 
modity. It is the necessary pre-requisite of a commodity 
to be a use-value, but it is immaterial to the use-value 
wh ether it is a commodity or not. Use- value in this 


indifference to the nature of its economic destination, 
i. e. use-value as such lies outside the sphere of in 
vestigation of political economy. 1 It falls within the 
sphere of the latter only in so far as it forms its own 
economic destination. It forms the material basis 
which directly underlies a definite economic relation 
called exchange value. 

Exchange-value appears at first sight as a quantita 
tive relation, as a proportion in which use-values are 
exchanged for one another. In such a relation they 
constitute equal exchangeable quantities. Thus, a vol 
ume of Propercius and eight ounces of snuff may rep 
resent the same exchange value, in spite of the dissim 
ilar use-values of tobacco and elegy. As exchange-val 
ue, onejdnd of use-value jj^ worth as much as another 
kind, if only taken in right proportion. The exchange 
value of a palace can be expressed in a certain number 
of boxes of shoe-blacking. On the contrary, London 
manufacturers of shoe-blacking have expressed the 
exchange value of their many boxes of blacking, in 
palaces. Thus, entirely apart from their natural forms 
and without regard to the specific kind of wants for 
which they serve as use-values, commodities in certain 
quantities equal each other, take each other s place in 
exchange, pass as equivalents, and in spite of their 
variegated appearance, represent the same entity. 

That is the reason why German compilers are so fond ot 
dwelling on use-value, calling it a "good." See e. g. L. Stein, 
"System der Staatswissenschaften," v. I., chapter on "goods" 
(Gutter). For intelligent information on "goods" one must 
turn to treatises on commodities. 


Use-values are primarily means of existence. These 
means of existence, however, are themselves products 
of social life, the result of expended human vital pow 
er, materialised labor. As the embodiment of social 
labor, all commodities are the crystallization of the 
same substance. Let us now consider the nature of 
this substance, i. e., of labor, which is expressed in 
exchange value. 

Let one ounce of gold, one ton of iron, one quarter 
of wheat and twenty yards of silk represent equal ex 
change values. As equivalents, in which the qualita 
five difference between their use-values has been elim 
inated, they represent equal volumes of the same kind 
of labor. The labor which is equally embodied in all 
of them must be uniform, homogeneous, simple labor. 
It matters as little in the case of labor whether it be 
embodied in gold, iron, wheat, or silk, as it does in 
the case of oxygen, whether it appears in the rust of 
iron, in the atmosphere, in the juice of a grape, or in 
the blood of a human being. But the digging of gold, 
the extraction of iron from a mine, the raising of 
wheat and the weaving of silk are so many kinds of 
labor, differing in quality. As a matter of fact, what 
in reality appears as a difference in use-values, is in 
the process of production, a difference in the work 
creating those use-values. Just as labor, which creates 
exchange value, is indifferent to the material of use- 
values, so it is to the special form of labor itself. Fur 
thermore, the different use-values are the products of 
the work of different individuals, consequently the re 
sult of various kinds of labor differing individually; 

~- 23 

from one another. But as exchange values, they rep 
resent the same homogeneous labor, i. e., labor from 
which the individuality of the workers is eliminated. 
I^abor creating- exchange vatog is r therefore, abstract 
general labor. 

If one ounce of gold, one ton of iron, one quarter of 
wheat, and twenty yards of silk are exchange values of 
equal magnitude or equivalents; then one ounce of 
gold, half a ton of iron, three bushels of wheat and 
five yards of silk are exchange values of different 
magnitudes, and this quantitative difference is the only 
difference of which they are capable as exchange val 
ues. As exchange values of different magnitudes, they 
represent greater or smaller quantities of that simple, 
homogeneous, abstract, general labor, which forms 
the jub&tance of exchange value. The question arises, 
how are these quantities to be measured? Or, rather 
what constitutes the substance of labor, which makes 
it capable of quantitative measurement, since the Quan^ 
titariye differences of commodities in their capacity of 
exchange values are but quantitative differences of la 
bor embodied in them. Just as motion is measured by 
time, so is labor measured by labor-time. Given the 
quality of labor, the difference in its duration is the 
only property by which it can be distinguished. As la 
bor-time, labor has the same standard of measurement 
as the natural time measures, viz., hours, days, weeks, 
etc. Labor-time is the vital substance of labor, inde 
pendent of its form, composition, individuality ; it is its 
vital substance quantitatively, having at the same time 
its own inherent measure. Labor-time embodied in the 

_ 24 

use-values of commodities is the substance which 
makes exchange values and, therefore, commodities of 
them and at the same time serves to measure definite 
quantities of their value. Corresponding quantities of 
different use-values, in which the same quantity of la 
bor-time is embodied, are equivalents; or, to put it in 
another form, all use-values are equivalents when 
taken in proportions containing the same quantity of 
expended, materialized labor-time. As exchange val 
ues, all commodities are but definite measures of Tun- 
gealed labor r jime. 

To understand how exchange value is determined by 
labojMjme, the following main points must be kept in 
mind: The reduction of labor to simple labor, devoid 
of any quality, so to speak ; the specific ways and 
\j* means by which exchange value-creating, i. e., com 
modity producing labor becomes social labor; finally, 
the difference between labor as the producer of use- 
values, and labor as the creator of exchange values. 

In order to measure commodities by the labor-time 
contained in them, the different kinds of labor must be 
reduced to uniform, homogeneous, simple labor, in 
short, to labor which is qualitatively the same, and. 
therefore, differs only in quantity. 

This reduction appears to be an abstraction ; but it 
is an abstraction which takes place daily in the social 
process of production. The conversion of all commod 
ities into labor-time is no greater abstraction nor a less 
real process than the chemical reduction of all organic 
bodies to air. Labor, thus measured by time, does not 
appear in reality as the labor of different individuals. 

25 . 

but on the contrary, the various working- individuals 
rather appear as mere organs of labor ; or, in so far as 
labor is represented by exchange values, it may be de 
fined as human labor in general. This abstraction of 
human labor in general virtually exists in the average 
labor which the average individual of a given society 
can perform a certain productive expenditure of hu 
man muscles, nerves, brain, etc. It is unskilled labor 
to which the average individual can be put and which 
he has to perform in one way or another. The char 
acter of this average labor varies in different countries 
and at different stages of civilization, but appears fixed 
in a particular society. Unskilled labor constitutes the 
bulk of all labor performed in capitalist society, as 
may be seen from all statistics. 

It is obvious that if A spends six hours in the pro 
duction of iron and six hours on linen, and B also pro 
duces iron during six hours and linen during another 
six hours, it is but a different application of the same 
labor time that would be expended, if A produced iron 
during twelve hours, while B worked twelve hours on 
linen. But how about skilled labor which rises above 
the level of average labor by its higher intensity, by its 
greater specific gravity? This kind of labor resolves 
itself into unskilled labor composing it; it is simple 
labor of a higher intensity, so that one day of skilled 
labor, e. g., may equal three days of unskilled labor. 
This is not the place to consider the laws regulating 
this reduction. It is clear, however, that such reduction 
does take place, for, as exchange value, the product of 
the most skilled labor is, when taken in a certain pro- 


portion, equivalent to the product of unskilled average 
labor, or equal to a definite quantity of that unskilled 

The determination of exchange-value by means of 
labor-time implies, further, the fact that an equal 
quantity of labor is embodied in any given commodity, 
e. g., a ton of iron, no matter whether it is the work of 
A or B, that is to say, various individuals expend an 
equal amount of labor-time for the production of the 
same use-value of a given quality and quantity. It is 
thus assumed that the labor-time contained in a com 
modity is the labor-time necessary for its production, 
i. e., it is the labor-time which is required for the pro 
duction of another specimen of the same commodity 
under the same general conditions of production. 

The conditions, of labor, which creates exchange 
value, as shown by the analysis of the latter, are social 
conditions of labor or conditions of social labor. So 
cial, not in the ordinary, but in a special sense. It is 
a specific form of the social process. The homogene 
ous simplicity of labor means first of all equality of 
the labors of various individuals, a reciprocal relation 
of equality of their labors determined by the actual re 
duction of all kinds of labor to uniform labor. The 
labor of every individual, as far as it is expressed in 
exchange value possesses this social character of 
equality and finds expression in exchange value only 
in so far as it is a relation of equality with the labor 
of all other individuals. 

Furthermore, the labor-time of a single individual is 
directly expressed in exchange value as universal 


labors-time, and this universal character of individ 
ual labor is the manifestation of its social character. 
The labor-time represented by exchange value is the 
labor-time of an individual, but of an individual undis 
tinguished from other individuals in so far as they per 
form the same labor ; therefore, the time required by 
one individual for the production of a certain commod 
ity is the necessary labor-time which any other indi 
vidual would have to spend on the production of the 
same commodity. It is the labor-time of an individual, 
his labor-time, but only as labor-time common to all. 
regardless as to which particular individual s labor- 
time it is. As universal labor-time it is represented in 
a universal product, in a universal equivalent, in a 
definite quantity of materialized labor-time ; the latter 
is indifferent as to the particular form of use-value in 
which it appears directly as the product of an indi 
vidual, and may be turned at will into any other form 
of use-value to represent the product of any other in 
dividual. Only as such a universal quantity, is it a 
social quantity. In order_to result in exchange value, 
the labor of an individual must be turned into a uni 
versal, equiimlont \. e., the labor-time of an indi 
vidual must be expressed as universal labor-time, or 
universal labor-time as that of an individual. It is the 
same as though different individuals had put together 
their labor-time and contributed the different quanti 
ties of labor-time at their common disposal in the form 
of different use-values. The labor-time of the indi 
vidual is thus, in fact, the labor time which society re 
quires for the production of a certain use-value, i. e., 


for the satisfaction of a certain want. But the ques 
tion that interests us here is as to the specific form in 
which labor acquires a sQCj&LcJharacter. Let us suppose 
that a certain quantity of labor-time of a spinner is 
realized in 100 Ibs. of yarn. Suppose 100 yards of lin 
en, the product of the weaver, represent the same 
quantity of labor-time. Inasmuch as these two products 
represent equal quantities of universal labor-time and. 
hence, are equivalents of every use-value which con 
tains the same amount of labor-time, they are also 
equivalent to each other. Only because the labor-time 
of the spinner and that of the weaver take the form of 
universal labor-time and their products appear as uni 
versal equivalents, is the labor of the weaver realized 
for the spinner, and that of the spinner, for the weav 
er, the labor of one takes the place of the labor of the 
other, i. e., the social character of their labors is real 
ized for both. Quite different it was under the patri 
archal system of production, when spinner and weaver 
lived under the same roof, when the female members 
of the family did the spinning, and the male members 
did the weaving to supply the wants of their own fam 
ily ; then yarn and linen were social products, spinning 
and weaving were social labor within the limits of the 
family. But their social character did not manifest it 
self in the fact that yarn, as a universal equivalent, 
could be exchanged for linen as a universal equivalent, 
or that one was exchanged for another, as identical 
and equivalent expressions of the same universal la 
bor-time. It was rather the family organization with 
its natural division of labor that impressed its peculiar 

social stamp on the product of labor. Or, let us take 
the services and payments in kind of the Middle Ages. 
It was the specific kind of labor performed by each in 
dividual in its natural form, the particular and not the 
universal aspect of labor, that constituted -then the so 
cial tie. Or, let us finally take labor carried on in com 
mon in its primitive natural form, as we find it at the 
dawn of history of all civilized races. 1 It is clear that 
in this case labor does not acquire its social character 
from the fact that the labor of the individual takes on 
the abstract form of universal labor or that his prod 
uct assumes the form of a universal equivalent. The 
very nature of production under a communal system 
makes it impossible for the labor of the individual to 
be private labor and his product to be a private prod 
uct ; on the contrary, it makes individual labor appear 
as the direct function of a member of a social organ 
ism. On the contrary, labor, which is expressed in ex 
change value, at once appears as the labor of a separ 
ate individual. It becomes social labor only by taking 

*A ridiculous presumption has gained currency of late to 
the effect that common property in its primitive form is spe 
cifically a Slavonian, or even exclusively Russian form. It 
is the primitive form which we can prove to have existed 
among Romans, Teutons, and Celts; and of which numerous 
examples are still to be found in India, though in a partly 
ruined state. A closer study of the Asiatic, especially of In 
dian forms of communal ownership would show how from the 
different forms of primitive communism different forms of its 
dissolution have been developed. Thus e. g. the various origi 
nal types of Roman and Teutonic private property can be 
traced back to various forms of Indian communism. 


on the form of its direct opposite, the form of abstract 
universal labor. 

Labor, which creates exchange value, is^fijnaUv^char- 
scterized by the fact that even the social relations of 
men appear in the reverseoTTofnTof a sodaJTrelation of 
things. Only in so~faF~asf"two use-values are in a 
mutual relation of exchange values does the labor of 
different persons possess the common property of be 
ing identical universal labor. Hence, if it be correct to 
say that exchange value is a relation between persons, 1 
it must be added that it is a relation disguised under a 
material cover. Just as a pound of iron and a pound of 
gold represent the same weight in spite of their differ 
ent physical and chemical properties, so do two use- 
values, as commodities containing the same quantity 
of labor-time, represent the same exchange value. Ex 
change value thus appears as the natural social destina 
tion of use-values, a property which they possess by 
virtue of being things and in consequence of which 
they are exchanged for one another in definite propor 
tions, or form equivalents, just as chemical elements 
combine in certain proportions, forming chemical 
equivalents. It is only through the habit of everyday 
life that we come to think it perfectly plain and com 
monplace, that a social relation of production should 
take on the form of a thing, so that the relation of per 
sons in their work appears in the form of a mutual re- 

"La Ricchezza e una ragione tra due pereone." ("Value is 
a relation between two persons") Galiani, "Delia Mtoneta," 
p. 220 in vol. II. of Custodi s collection of "Scrittori classic! 
Italian! di Economia Politica. Parte Moderna," Milano, 1803. 


lation between things, and between things and persons. 

In commodities this mystification is as yet very sim 
ple. It is more or less plain to everybody that a. rela 
tion of commodities as exchange values is nothing but 
a mutual relation between persons in their productive 
activity. This semblance of simplicity disappeanTin 
higher productive relations. All the illusions in regard 
to the monetary system are due to the fact that money 
is not regarded as something representing a social re 
lation of production, but as a product of nature en 
dowed with certain properties. The modern economists 
who sneer at the illusions of the monetary system, be 
tray the same illusion as soon as they have to deal with 
higher economic forms, as, e. g., capital. It breaks 
forth in their confession of naive surprise, when what 
they have just thought to have defined with great diffi 
culty as a thing suddenly appears as a social relation 
and then reappears to tease them again as a thing, be 
fore they have barely managed to define it as a social 

Since the exchange value of commodities is, in fact, 
nothing but a mutual relation of the labors of individ 
uals labors which are similar and universal nothing 
but a material expression of a specific social form of 
labor, it is a tautology to say that labor is the only 
source of exchange value and consequently of wealth, 

"In its natural state, matter ... is always destitute 
of value." McCulloch, "A Discourse on the Rise, Progress. 
Peculiar Objects, and Importance of Political Economy," 2nd 
edition, Edinburgh, 1825, p. 48. It is evident how high even a 
MPCulloch stands above the fetichism of German "thinkers," 


in so far as the latter consists of exchange values. 
Similarly, it is a tautology to say that matter in its 
natural state has no exchange value, because it does 
not contain any labor, and that exchange value as such 
does not contain matter. But when William Petty 
calls "labor the father and earth the mother of wealth," 
or when Bishop Berkeley asks "whether the four ele 
ments and man s labour therein, be not the true source 
of wealth," 1 or when the American, Thomas Cooper 
puts it popularly : "Take away from a piece of bread 
the labour bestowed by the baker on the flour, by the 
miller on the grain brought to him, by the farmer in 
ploughing, sowing, tending, gathering, threshing, 
cleaning and transporting the seed, and what will re 
main? A few grains of grass, growing wild in the 
woods, and unfit for any human purpose" 1 then all 
these views do not refer to abstract labor as the source 
of exchange value, but to concrete labor as the source 
of material wealth ; in short, to labor in so far as it 
produces use-values. In assuming that a commodity 
has use-value we assume the special usefulness and 
distinct fitness of the labor absorbed by it, but that is 
all there is to the view of labor as useful labor from 
the standpoint of commodity. Considering bread as 
a use-value, we are interested in its properties as 
an article of food and not at all in the different kinds 
of labor of the farmer, miller, baker, etc. If by some 
who declare "matter" and half a dozen other foreign things 
to be elements of value. Cf. e. g. L. Stein, 1. c. v. I., p. 110. 

Berkeley, The QueriRt, Tx>ndon, 1750. 

Thomas Cooper, Lectures on the Elements of Political 
Economy, London, 1831, p. 99. 


invention nineteen-twentieths of this labor could be 
saved, the loaf of bread would still render the same 
service as before. If it fell ready-made from the sky 
it would not lose a single atom of its use-value. While 
labor which creates exchange value is realized in the 
equality of commodities as universal equivalents, labor 
as a productive activity with a useful purpose is real 
ized in the endless variety of use-values created by it. 
While labor which creates exchange values is abstract, 
universal and homogeneous, labor which produces use- 
values is concrete and special and is made up of an 
endless variety of kinds of labor according to the way 
in which and the material to which it is applied. 

Ft Is wrong to speak of labor in so far as it is ap 
plied to the production of use-values as of the only 
source of wealth, namely, the material wealth produced 
by it. Being an activity intended to adapt materials to 
this or that purpose, it requires matter as a pre-requi- 
site. In different use-values the proportion between 
labor and raw material varies greatly, but use-value 
always has a natural substratum. Labor, as an activity, 
directed to the adaptation of raw material in one form 
or another, is a natural condition of human existence, 
a condition of exchange of matter between man and 
nature, independent of all social forms. On the con 
trary, labor producing exchange value is a specifically 
social form of labor. Tailoring, e. g., in its material 
manifestation as a distinct productive activity, pro 
duces a coat, but not the exchange value of the coat. 
The latter is produced not by the labor of the tailor as 
such, but by abstract universal labor, and that belongs 


to a certain organization of society which has not been 
brought about by the tailor. Thus, the women under 
the ancient system of house industry made coats with 
out producing the exchange value of the coats. Labor 
as a source of material wealth was known to Moses, 
the legislator, as well as to Adam Smith, the customs 
official. 1 

Let us consider now some propositions which fol 
low from the determination of exchange value by 

As a use-value, every commodity owes its usefulness 
to itself. Wheat, e. g., serves as an article of food. A 
machine saves labor to a certain extent. This function 
of a commodity by virtue of which it serves only as 
use-value, as an article of consumption, may be called 
its service, the service which it renders as use-value. 
But as an exchange value, a commodity is always re 
garded as a result ; the question in this case is not as 
to the service which it renders, but as to the service* 
which it has been rendered in its production. Thus, 
the exchange value of a machine is determined not by 

F. List could never grasp the difference between labor as a 
source of use-value and labor as the creator of certain social 
form of wealth or exchange value, because comprehension was 
altogether foreign to his practical mind; he, therefore, saw in 
the modern English economists mere plagiarists of Moses, the 

*It can be readily understood what kind of "service" is ren 
dered by the category "service" to economists of the type of 
J. B. Say and F. Bastiat, whose pondering sagacity, as Mai- 
thus has justly remarked, always abstracts from the spe 
cifically definite forms of economic relations. 


the quantity of labor-time which it saves, but by the 
quantity of labor-time which has been expended on its 
own production and which is, therefore, required to 
produce a new machine of the same kind. 

If, therefore, the quantity of labor-time required for 
the production of commodities remained constant, 
their exchange value would remain the same. But the 
ease and the difficulty of production are constantly 
changing. If the productivity of labor increases, the 
same use-value will be produced in less time. If the 
productivity of labor declines, more time will be re 
quired for the production of the same use-value. Thus, 
the labor-time contained in a commodity or its ex- 
change^vaT5erTs Invariable -quantity, increasing or di 
minishing in an inverse ratio to the rise and fall of the 
productivity of labor. The productive power of labor 
which is applied in the manufacturing industry on a 
predetermined scale depends in the agricultural and 
extractive industries also on natural conditions which 
are beyond human control. The same labor will yield 
a greater or less output of various metals, according to 
their more or less close occurrence in the earth s crust. 
The same labor may be embodied in two bushels of 
wheat in a favorable season, and only in one in an un 
favorable season. In this case, 

as natural conditions, seem to determine the exchange 
value of commodities, because they determine the pro 
ductivity of certain kinds of labor which depend upon 
natural conditions. 

Unequal volumes of different use-value contain the 
same quantity of labor-time or the same exchange value 


The smaller the volume of a use-value containing a 
certain quantity of labor-time as compared with other 
use-values, the greater its specific ^exchange-value. If 
we find that certain use-values, such as, e. g., gold, silver, 
copper and iron, or wheat, rye, barley and oats, form 
a series of specific exchange values which, though not 
retaining exactly the same numerical ratio, still retain 
through widely remote epochs of civilization the same 
rough proportion of relatively larger and smaller quan 
tities, we may draw the conclusion that the progressive 
development of the productive powers of society has 
equally, or approximately so, affected the labor-time 
necessary for the production of the various commod 

The exchange value of a commodity is not revealed 
in^its own use-value. But, as the jembodiment oTUTrK 
versa! social labor-time, the use-value of one commod 
ity bears a certain ratio to the use-values of other com 
modities. Thus, the exchange value of one commodity 
is manifested in the use-values of other commodities. 
An equivalent is, in fact, the exchange value of one 
commodity expressed in the use-value of another com 
modity. If I say, e. g., that one yard of linen is worth 
two pounds of coffee, then the exchange value of linen 
is expressed in terms of the use-value of coffee, viz., in a 
certain quantity of that use-value. This ratio being 
given, I can express the value of any quantity of linen 
in coffee. It is clear that the exchange value of one 
commodity, say linen, is not confined to the ratio of 
any one commodity, e. g. coffee, as its equivalent. The 
quantity of universal labor-time which is represented 


in one yard of linen is at the same time embodied in 
an endless variety of volumes of use-values of all other 
commodities. The use-value of any other commodity 
forms the equivalent of one yard of linen, in the pro 
portion in which it represents the same quantity of 
labor-time as that yard of linen. The exchange value 
of this single commodity is, therefore, fully expressed 
in the endless number of equations in which the use- 
values of all other commodities form its equivalents. 
Not until the exchange value of a commodity is ex 
pressed in the sum total of these equations or of the 
different proportions in which one commodity is ex 
changed for every other commodity, does it find an 
exhaustive expression as a universal equivalent; e. g., 
the series of equations : 

1 yard of linen = y? Ib. of tea, 
1 yard of linen 2 Ibs. of coffee, 
1 yard of linen 8 Ibs. of bread, 
1 yard of linen = 6 yards of calico, 
may be represented as follows : 

1 yard of linen <= ^ Ib. of tea -f- y? Ib. of coffee -f- 
2 Ibs. of bread + 1^2 yards of calico. 

Therefore, if we had before us the sum total of the 
equations, in which the value of a yard of linen is ex 
haustively expressed, we could represent its exchange 
value in the form of a series. As a matter of fact, the 
series is an endless one, since the circle of commodities, 
constantly expanding, can never be closed up. But 
whole the exchange - .value. ... Q.JL QBe ^commodity is _thus 
measured by the use- values of all other commodities, 
the exchange values of all the other commoditTes~are, 


in their turn, measured by the use-value of this one 
commodity. 1 

If the exchange value of one yard of linen is expressed 
in ^2 Ib. of tea, or 2 Ibs. of coffee, or 6 yards of calico, 
or 8 Ibs. of bread, etc., it follows that coffee, tea, calico, 
bread, etc., are equal to each other if taken in the same 
proportion in which they are equal to the third article, 
linen ; consequently, linen serves as the common measure 
of their exchange values. Every commodity, as the 
embodiment of universal labor-time, i. e., as a certain 
quantity of universal labor-time, expresses in turn its 
exchange value in definite quantities of the use-values 
of all other commodities, and the exchange values of all 
the other commodities are, on the other hand, measured 
by the use-value of this one exclusive commodity. But 
as an exchange value, every commodity is at the same 
time the one exclusive commodity that serves as a com 
mon measure of the exchange values of all other com 
modities; and, on the other hand, it is but one of the 
many commodities in the entire series of which every 
commodity expresses directly its exchange value. 

The value of a commodity is not affected by the 
number of commodities of other kinds. But the length 

1 "Egli e" proprio ancora delle misure d aver si fatta relazione 
colle cose misurate, che in certo modo la miaurata divien 
misura della misuranle." Montanari, Delia Moneta, p. 48 in 
v. III. of Custodies "Scrittori classici Italiani di Economia 
Politica. Parte Antica." ("It is the property of measure to be 
in such a relation to the things measured, that in a certain way 
the thing measured becomes the measure of the measuring 


of the series of equations in which its exchange value is 
realized does depend upon the greater or less variety 
of other commodities. .The series of equations in which 
the value of coffee, e. g., is represented, indicates the 
extent to which it is exchangeable, the limits within 
which it performs the function of an exchange value* 
The j>Ygjngp vahip of a nrnnmnflifv as an embodiment 
of universal social labor-time is expressed in its equiv 
alence to an endless variety of use-values. 

We have seen that the exchange value of a commodity 
varies with the quantity of labor-time directly con 
tained in it. Its realized exchange value, i. e., its ex 
change value expressed in the use-values of other com 
modities, must also depend on the proportion in which 
the labor-time spent on the production of all other com 
modities is changing. If, e. g., the labor-time required 
for the production of a bushel of wheat remained con 
stant, while that required for the production of all 
other commodities doubled, the exchange value of a 
bushel of wheat expressed in its equivalents would be 
come half as large as before. The result would be prac 
tically the same as if the amount of time necessary for 
the production of one bushel of wheat had been re 
duced by one-half, and that required for all other com 
modities had remained unchanged. TJje. yaloie .of com 
modities is determined by the proportion in which_J;hej 
ean~Be produced in the same labor-time. In order to 
see whatf possible changes this proportion may undergo, 
let us take two commodities, A and B. 

First case. Let the labor-time required for the pro 
duction of commodity B remain unchanged. In thai 


case the exchange value of A, expressed in terms of B, 
rises and falls with the rise and fall of the labor-time 
required for the production of A. 

Second case. Let the labor-time required for the pro 
duction of commodity A remain constant. Then the 
exchange value of A, expressed in terms of B, falls and 
rises in an inverse ratio with the rise and fall of the 
labor-time required for the production of B. 

Third case. .Let the labor-time required for the pro 
duction of commodities A and B rise and fall in equal 
proportion. Then the expression of equivalence of A 
and B remains unchanged. If through some cause the 
productivity of all kinds of labor were to decline uni 
formly, so that the production of all commodities would 
require an equally increased quantity of labor-time, then 
the value of all commodities would rise, though the ex 
pression of their exchange values would remain un 
changed, and the actual wealth of society would de 
crease, because it would have to expend more labor- 
time on the production of the same stock of use-values. 

Fourth case. Let the labor-time required for the pro 
duction of A and B rise and fall, but not uniformly ; that 
is to say, the labor-time required for the production of A 
may rise, while that required for B may fall, or vice 
versa. All of which can be reduced to the simple capo 
where the labor-time required for the production of 
one commodity remains unchanged, while that required 
for the other rises or falls. 

The exchange value of any commodity is expressed 
in the use-value of any other commodity, bo it in in 
tegral units or in fractions thereof. As exchange value, 


every commodity is capable of subdivision, like the 
labor-time embodied in it. The equivalence of commod 
ities is independent of their physical divisibility as use- 
values, just as the sum of the exchange values of com 
modities is indifferent to the change of form which use- 
values have to undergo when converted into a single 
new commodity. 

So far we have considered commodities from a two->\ 
fold point of view, as use-values and exchange values 
alternately. But a commodity as such is a direct com 
bination of use-value and exchange value; and it is a 
commodity only in relation to other commodities. The V 
actual relation between commodities constitutes the 
process of their exchange. It is a social process par 
ticipated in by individuals independent of each other 
but the part they take in it is that of owners of com* 
modities only. Their mutual relations are those- of their 
commodities, and thus they really appear as conscious 
factors of the process of exchange. 

A commodity is a use-value, wheat, linen, a diamond, 
a machine, etc., but as a commodity it is, at the same 
time, not a use-value. If it were a use-value for its 
owner, i. e., a direct means for the satisfaction of his 
own wants, then it would not be a commodity. To him 
it is rather a non-use-value; it is merely the material 
depository of exchange-value, or simply a means of ex 
change; as an active bearer of exchange value, use-value 
becomes a means of exchange. To the owner it is a 
use-value only in so far as it constitutes exchange value. 1 

1 It is in that sense that Aristotle (eee the passage quoted at 
the beginning of this chapter) conceives exchange value. 


It iia? yet to tocom* *-usevalue^vi2^Jtt-otheiB. Not 
being a use-value to its owner, it is a use-value to the 
owners of other commodities. If it is not, then the labor 
expended on it was useless labor, and the result of that 
labor is not a commodity. On the other hand, the 
commodity must become a use-value to the owner him 
self, because his means of existence lie outside of it in 
the use-values of commodities not belonging to him. 
In order to become a use-value, the commodity must 
meet the particular want of which it is the means of 
satisfaction. TTso-valnpq nf pnTnmoditipfl qyp thus 
realized use-values through a universal change of han<J 
by passing from the hands in which they were held as 
means of exchange into those where they become use 
values. Only through this universal transfer of com 
modities does the labor contained in them become use 
ful labor. In this process of their mutual interchange 
as use-values, commodities do not acquire any new eco 
nomic forms. On the contrary, even the form which 
marked them as commodities disappears. Bread, e. g., 
by changing hands from the baker to the consumer does 
not change its identity as bread. On the contrary, it is 
only the consumer that begins to regard it as a use- 
value,, as a certain article of food, while in the hands of 
the baker it was only the bearer of an economic rela 
tion, a palpable yet transcendental object. Thus, the 
only change of form that commodities undergo while 
becoming use-values, consists in the fact that they cease 
to be, as a matter of form, non-use-values to their own 
ers, and use-values to those who do not own them. To 
become use-values commodities must be universally 


jdienatedj they must enter the sphere of exchange ; but 
tneyare subject to exchange in their capacity of ex 
change values. Hence, in order to be realized as use- 
values, they must be realized as exchange values. 

While the single commodity appeared from the stand 
point of use-value as something independent, as ex 
change value it was regarded first of all in its relation 
to aH other commodities. This relation was, however, 
merely theoretical, imaginary. It becomes real only in 
the process of exchange. On the other hand, a com 
modity is an exchange value in so far as a certain quan 
tity of labor-time has been expended on it, and it con 
sequently represents materialized labor-time. But of 
itself it is only materialized individual labor-time of a 
particular kind, and not universal labor-time. There 
fore, it is not directly an exchange value, but must first 
become such. First of all, it is an embodiment of uni 
versal labor-time only in so far as it represents labor- 
time applied to a definite useful purpose, i. e., when it 
represents a use-value. This was the material condi 
tion under which alone labor-time contained in com 
modities was regarded as universal social labor. Thus, 
while a commodity can become a use-value only_^fter 
it has been realized as an exchange value, it can, on the 
other-hand^ be. jejalized as an exchange value only if it 
proves to be a use-value in the process of alienation. 

A commodity can be alienated as a use- value only to 
one whom it serves as a use-value, i. e., as a means of sat 
isfying a certain want. On the other hand, it is ex 
changed for another commodity, or, if we put ourselves 
on the side of the owner of the other commodity, it, too, 

ran be alienated, i. e., be realized, only if brought in 
contact with that particular want of which it is the ob 
ject. In the universal exchange of commodities as 
use-values the basis for their mutual relations is in their 
material difference as distinct objects which satisfy 
different wants by their specific properties. But as 
mere use-values, they are indifferent to each other, and 
are incommensurable. As use-values they can be ex 
changed only with reference to certain wants. They 
are exchangeable only as equivalents, and they are equiv 
alents only as equal quantities of materialized labor- 
time, eo that all regard to their natural properties as 
use-values and therefore to the relation of the com 
modities to particular wants is eliminated. On the 
contrary, a commodity is realized as an exchange value 
by replacing as an equivalent any definite quantity of 
any other commodity, regardless of whether it is a use- 
value for the owner of the other commodity or not. But 
to the owner of the other commodity it is a commodity 
only in so far as it is a use-value to him, and it becomes 
an exchange value to its owner only in so far as it is a 
commodity to that other person. Thus, the same rela 
tion appears as a proportion between commodities as 
magnitudes of the same denomination, but differing 
qualitatively; or, as an expression of their equivalence 
as embodiments of universal labor-time, and, at the 
same time, a? a relation of qualitatively different ob 
jects, of use-values intended for the satisfaction of par 
ticular wants, in short, a relation in which they are dis 
tinguished as actual use- values. But this equivalence 
and non-equivalence mutually exclude each other. Thus 


we have before us not only a vicious circle of problems 
in which the solution of one implies that of the other, 
but a combination of contradicting claims, since the 
fulfillment of one is directly connected with that of its 

The process of exchange of commodities must result 
both in the unfolding and in the solution of these con 
tradictions, neither of which, however, can appear in 
that process in this simple way. We have only observed 
how commodities are mutually related to each other as 
use-values, i. e., how they appear as use-values within^ 
the process of exchange. The exchange-value, on the 
contrary, as we have considered it so far, appeared as an 
abstraction formed in our own minds, or if we may 
so put it in the mind of the individual owner of com 
modities, which lie stored in his warehouse as use-values, 
and weigh upon his conscience as exchange values. In 
the process of exchange, however, commodities must be 
not only use- values, but also exchange values to one 
another, and that should appear as their own mutual 
relation. The difficulty which we first encountered was 
that a commodity must be first alienated and delivered 
to its purchasers as a use-value, in order to appear as an 
exchange value, as materialized labor, while on the other 
hand its alienation as use-value implies its being an 
exchange value. But let us assume that this difficulty 
has been overcome. Suppose the commodity has di 
vested itself of its use-value, and has thereby fulfilled 
the material condition of being socially useful labor, 
instead of a particular labor of an individual. In that 
case, the commodity must become an exchange value, 


a universal equivalent, an embodiment of universal 
labor-time for all other commodities in the process of 
exchange, and thus, leaving behind its limited role of a 
particular use-value, acquire the ability to be directly 
represented in all use-values as its equivalents. But 
every commodity is just suck a commodity, appearing as 
a direct incarnation of universal labor-time by divesting 
itself of its particular use-value. On the other hand, 
however, commodities confront each other in the pro 
cess of exchange as particular commodities, as the labor 
of private individuals embodied in particular use- values. 
Universal labor-time is itself an abstraction, which, as 
9en, does not exist for commodities. 

Let us examine the series of equations in which the 
exchange value of a commodity finds its concrete ex 
pression, e. g. : 

1 yard of linen = 2 Ibs. of coffee. 
1 yard of linen = y 2 lb. of tea, 
1 yard of linen = 8 Ibs. of bread, etc. 
These equations simply signify that equal quantities 
of^universal social labor-time are embodied in one yard 
of linen, two pounds of coffee, half a pound of tea, etc. 
But as a matter of fact the individual labors which are 
represented in these particular use-values, become uni 
versal, and, in that form, also social labor, only when 
they are actually exchanged for one another in pro 
portion to the labor-time contained in them. Social 
labor-time exists in these commodities in a latent state, 
so to say, and is first revealed in the process of exchange. 
We do not proceed from the labor of individuals as 
labor, but, on the contrary, from special labor 


of private individuals which appears as universal social 
labor only by divesting itself of its original character 
in the process of exchange. Universal social labor is, 
therefqrgjjn midy matte aj&umplioii, but a gruwrng-re- 
sult. And thus we are confronted with a new difficulty, 
that on the one hand commodities must enter the pro 
cess of exchange as embodiments of universal labor- 
time, while, on the other hand, this embodiment of the 
labor-time of individuals as social labor-time is itself 
a result of the process of exchange. 

Every commodity becomes an exchange value by di 
vesting itself of its use-value, or of its original nature. 
The commodity must therefore assume a double ca 
pacity in the process of exchange. But that second 
capacity of exchange value can appear only in the shape 
of another commodity, because only commodities con 
front each other in the process of exchange. How is a 
particular commodity to represent directly materialized 
universal labor-time, or to put it differently how is 
individual labor-time, which is embodied in a particular 
commodity to be made directly universal in character? 
The concrete -e-xpsessiou^of^the exchange^ va]ue of a_ 
commodity, i. e., of every commodity as a universal 
equivalent, is represented in an endless series of equa 
tions, such as: 

1 yard of linen 2 Ibs. of coffee. 

1 yard of linen y 2 Ib. of tea. 

1 yard of linen = 8 Ibs. of bread. 

1 yard of linen = 6 yards of calico. 

1 yard of linen = etc. 
The above form is theoretical in so far ar commod- 


ities are only thought of as definite quantities of mate 
rialized universal labor-time. But the capacity of a 
particular commodity to serve as a universal equivalent 
from a mere abstraction becomes a social result of the 
process of exchange by a simple inversion of the above 
series of equations, viz. : 

2 Ibs. of coffee = 1 yard of linen. 

YI Ib. of tea = 1 yard of linen. 

8 Ibs. of bread = 1 yard of linen. 

6 yards of calico = 1 yard of linen. 
While coffee, tea, bread, calico, in short, all commod 
ities express in linen the labor-time contained in them, 
the exchange value of linen, on the other hand, unfolds 
itself in all other commodities as its equivalents, and 
the labor-time embodied in it becomes direct universal 
labor-time, which is equally expressed in different vol 
umes of all other commodities. Linen thus becomes 
the universal equivalent through the universal action of 
all other commodities upon it. As exchange value, every 
commodity served as a measure of value of all other 
commodities. Now, on the contrary, since all com 
modities measure their exchange values by means of a 
particular commodity, this excluded commodity be 
comes the special expression of exchange value, as a 
universal equivalent. At the same time, the endless 
series of equations in which the exchange value of 
every commodity was expressed, is reduced to one single 
equation consisting of two members. The equation 
2 Ibs. of coffee = 1 yard of linen now fully expresses 
the exchange value of oofTee, for in tin s expression a 
yard of linen appears as the direct equivalent of a defi- 



nite quantity of every other commodity. Thus, within 
the sphere of exchange all commodities are or appear 
to each other as exchange values in the form of linen. 
Th proposition that commodities, as exchange values, 
are to each other as different quantities of materialized 
universal labor-time, may now be worded to the effect 
that commodities, as exchange values, represent nothing 
but different quantities of the same article, linen. Uni 
versal labor-time thus assumes the aspect of a distinct 
thing, as a commodity existing along with and outside 
of all other commodities. At the same time the equa 
tion 2 Ibs. of coffee = 1 yard of linen, in which one 
commodity appears as the exchange value of another, 
is yet to be realized. Only by being alienated as use 
value which depends upon whether it proves to be in 
the process of exchange the object of a certain want 
does the commodity actually transform its existence as 
coffee into the existence as linen and thus takes on the 
form of a universal equivalent and becomes, indeed, an 
exchange value for all other commodities. Conversely, 
since all commodities are turned into linen by being 
alienated as use-values, linen becomes the converted 
form of all other commodities, and only as a result of 
this transformation of all other commodities into it, 
it becomes the direct embodimentof^jj/rdversal labor- 
time, i. e., the product oTuniversal exchange andTof the 
elimination of individual labor. If commodities thus 
assume a twofold character in order to appear as ex 
change values to each other, the commodity which has 
been singled out as the universal equivalent becomes^ 
on the other hand, a use-value in two ways. Besides 


Its special use-value as a particular commodity, it as 
sumes a universal use-value. This latteFRnd of use- 
value constitutes its special feature, emanating as it 
does, from the specific part which the commodity plays 
as a result of the universal relation which all other 
commodities bear toward it in the process of exchange. 
The use-value of every commodity as an object of a 
particular want, lias a different value in different hands, 
e. g., it has a different value in the hands of the one who 
disposes of it, than in those of the one who acquires it. 
But the commodity singled out as the universal equiv 
alent, is now an object of a universal want arising from 
the very process of exchange, and it has the same use- 
value to everybody, viz., that of serving as the depos 
itory of exchange value, of being a universal means of 
exchange. Thus we find in one commodity the solution 
of the contradiction which is inherent in commodity as 
such, namely, of being at one and the same time a par- 1 
ticular use-value and a universal equivalent, and, there 
fore, a use-value for everybody or universal use-value. . 
Thus, while all other commodities express their ex- ! 
change value in the form of an ideal equation with the 
deluded commodity an equation yet to be realized 
the use-value of the special commodity, although real,! 
appears in the process itself as a mere form which is 
yet to be realized through transformation into actual 
use-values. Originally the commodity appeared simply 
as commodity, as universal labor-time embodied in a 
particular use-value. In the process of exchange, all 
commodities are related to the one excluded commodi 
ity as to a simple commodity, one which appears as the 


embodiment of universal labor-time in a particular use- 
value. Thus, particular commodities become related to 
one particular commodity as a universal commodity.* 
In that manner the mutual relations of possessors of 
commodities based on the fact that they regard their 
labor as universal social labor, takes on the aspect of 
their relations to commodities as exchange values; and 
the mutual relation of commodities as exchange values 
appears in the process of exchange as the relation of all 
of them to one particular commodity as to a specially 
adopted means of expression of their exchange value; 
again, from the point of view of that particular com 
modity the above relation appears as its specific relation 
to all other commodities, and, therefore, as its own 
definite, spontaneous, social character. The particular 
commodity which thus appears as the specially adopted 
expression of the exchange value of all other commod 
ities, or the exchange value of commodities as a particu 
lar exclusive commodity, is money. Money is a crystal 
lization of the exchange value of commodities which they 
themselves form in the process of exchange. Thus, while 
commodities become use-values to each other in the 
process of exchange by casting off all definite forms and 
entering into mutual relations in their direct material \ 
shape, they must assume a new form, viz., proceed to 
the formation of money in order to appear as exchange 
values to each other. Money is not a symbol, no more 
than the commodity aspect of a use-value is a symbol. 
That a syiaLrelaii production takes the form of an 
objectj2xifiting_outside of individuals, and that the defi- 
1 This expression is ued by Genovcai. 

nite relations into which individuals enter in the pro 
cess of production carried on in society, assume the 
form of specific properties of a thing, is a perversion 
and by no means imaginary, but prosaically real, mys 
tification marking all social forms of labor which creates 
exchange value. In money this mystification appears 
only more strikingly than in commodities. 

The necessary physical properties of the particular 
commodity in which the money form of all other com 
modities is to be crystallized as far as they are di 
rectly determined by the nature of exchange value 
^K are: divisibility to any desired extent, homogeneity of 
its parts, and uniformity of all the specimens of the 
commodity. As an embodiment of universal labor-time 
it must be homogeneous in its structure and capable of 
representing only quantitative differences. Another 
necessary property is durability of its use-value, as 
it must last through the process of exchange. 
The precious metals excel in these qualities. Money 
not being a result of a scheme or agreement, but having 
been produced instinctively in the process of exchange, 
a great variety of more or less unsuited commodities had 
successively performed its functions. At a certain 
stage of development of the process of exchange, 
the necessity arises for a polar distribution of the func 
tions of exchange value and use-value among commo 
dities, so that one commodity e. g. should act as a 
medium of exchange, while another is being alienated 
as a use-value. This necessity brings it about that one 
or even several commodities possessing the most generally 
accepted use-value, begin, incidentally at first, to play 

the part of money. Even if not direct means of satis 
fying existing wants, their being the most considerable 
material constituent part of wealth, insures to them a 
more general character than to the other use-values. 

Direct barter, the original natural form of exchange, 
represents rather the beginning of the transformation 
of use-values into cn.TnmnfHt.ip-Sj than_that of commo- 
ditieg_into money. Exchange value has as yet no form 
of its own, but is still directly bound up with use- 
value. This is manifested in two ways. Production, in 
its entire organization, aims at the creation of use- 
values and not of exchange values, and it is only when 
their supply exceeds the measure of consumption that 
use-values cease to be use-values, and become means of 
exchange, i. e., commodities. At the same time, they be 
come commodities only within the limits of being direct 
use-values distributed at opposite poles, so that the com 
modities to be exchanged by their possessors must be use- 
values to both, each commodity to its non-possessor. 
As a matter of fact, the exchange of commodities origin 
ates not within the primitive communities, 1 but where 
they end, on their borders at the few points, where they 
come in contact with other communities. That is where 
barter begins, and from here it strikes back into the in 
terior of the community, decomposing it. The various 

1 Aristotle makes the same remark with reference to the 
private family as the primitive community. But the prim 
itive form of family is the tribal family, from the historical 
dissolution of which the private family develops. "i y ^ O v>- TJ 

ffuoTp xoivtavia (TOVTO t<rr\v oixt a) (jtavrpov OTI ovSfy i<rrtv tpyov aurijj (name 

ly ri\ lAAay^s) "And in the first community, which is the family, 
this art is obviously of no use." Jowett s transl. 1. c.) 


use-values which first In-come commodities in the barter 
between different communities, such as slaves, cattle, 
metals, constitute therefore in most cases the first money 
within those communities themselves. We have seen 
how the exchange value of a commodity is manifested 
the more perfectly as exchange value, the longer the 
series of its equivalents or the greater the sphere of ex 
change of that commodity. With the gradual expansion 
of barter, the increase in the number of exchanges, and 
the growing diversification of the commodities drawn 
into exchange, commodities develop into exchange val 
ues, which leads to the formation of money and has 
a destructive effect on direct barter. The econ 
omists are in the habit of ascribing the origin of money 
to the difficulties which are encountered in the way of 
extensive barter, but they forget that these difficulties 
arise from the development of exchange value and from 
the fact that social labor becomes universal labor. E. g., 
commodities as use-values can not be subdivided at will, 
a property which they should possess as exchange 
values. Or, a commodity belonging to A may be a use- 
value to B, while the commodity belonging to B may not 
have any use-value to A. Or the owners of the com 
modities may need each other s indivisible goods in un 
equal proportions. In other words, under the pretence 
of analyzing simple barter, economists bring out certain 
aspects of the contradiction which is inherent in com 
modities as entities simultaneously embodying both use- 
value and exchange value. On the other hand, they con 
sistently cling to the idea that barter is the natural form 
of exchange, which suffers only from certain technical 


difficulties, for which money is a cunningly devised ex 
pedient. Arguing from this perfectly superficial view, 
an ingenious English economist has rightly maintained 
that money is merely a material instrument like a ship 
or a steam-engine, but not an expression of a social rela 
tion in the field of production and consequently not an 
economic category; and that it is, therefore, wrong to 
treat the subject in political economy, which really has 
nothing in common with technology. 1 

The world of commodities implies the existence of a 
highly developed division of labor ; this division is mani 
fested directly in the great variety of use-values, which 
confront each other as particular commodities and which 
embody as many different kinds of labor. The division 
of labor embracing all the particular kinds of productive 
occupations, is the complete expression of social labor in 
its material aspect viewed as labor creating use-values. 
But from the standpoint of commodities and within the 
process of exchange, it exists only in its results, in the 
variety of the commodities themselves. 

The exchange of commodities constitutes the social 
metabolic process, i. e. the process in which the exchange 
of the special products of private individuals is the re- 

1 "Money is, in fact, only the instrument for carrying on 
buying and selling (but, if you please, what do you understand 
by buying and selling?) and the consideration of it no more 
forms a part of the science of political economy, than the con 
sideration of ships, or steam engines, or of any other instru 
ment employed to facilitate the production and distribution of 
wealth." Th. Hodgskin, Popular Political Economy, etc. Lon 
don, 1827, p. 178, 179. 


suit of certain social relations of production into which 
the individuals enter in this interchange of matter. As 
they develop, the mutual relations of commodities crys- 
talize into various aspects of the universal equivalent 
and thus the process of exchange becomes at the same 
time the process of the formation of money. The whole 
of this process which takes the form of a succession of 
processes, constitutes ejaculation^ 


The analysis of commodities according to their two 
fold aspect of use-value and exchange value by which 
the former is reduced to work or deliberate productive 
activity; and the latter, to labor time or homogeneous 
social labor, is the result of a century and a half of criti 
cal study by the classical school of political economy 
which dates from William Petty in England and Bois- 
guillebert in France l and closes with Ricardo in the 
former country and Sismondi in the latter. 

PETTY reduces use-value to labor, without deceiving 
himself as to the natural limitation of its creative 

1 A comparative study of the writings and characters of 
Petty and Boisguillebert, outside of the light which it would 
throw upon the difference of French and English society at 
the end of the seventeenth and the beginning of the eighteenth 
centuries, would disclose the origin of the national contrast 
between English and French Political Economy. The same 
contrast reasserts itself in Ricardo and Sismondi. 


power. As regards concrete labor, he sizes it up in the 
magnitude of its social aspect, as the division of labor. 1 
This view of the source of material wealth does not re- 

1 Petty had illustrated the productive power inherent in the 
division of labor on a much grander scale than that was done 
later by Adam Smith. See his "Essay concerning the multi 
plication of mankind, etc.," 3rd edition, 1686, p. 35-36. He 
not only brings out the advantages of the division of labor on 
the example of the manufacture of a watch, as Adam Smith 
did later on that of a needle, but considers also a city and an 
entire country from the point of view of a large manufacturing 
establishment. The Spectator, of November 26, 1711, refers 
to this "illustration of the admirable Sir William Petty." 
McCulloch is, therefore, mistaken when he supposes that the 
Spectator confounded Petty with a writer forty years his 
junior. See McCulloch, "The Literature of Political Econ 
omy, a classified catalogue," London, 1845, p. 105. Petty is 
conscious of being the founder of a new science. His method ( 
he says, "is not yet very usual, for instead of using only com 
parative and superlative Words, and intellectual Arguments," 
he has undertaken to speak "in Terms of Number, Weight or 
Measure ; to use only Arguments of Sense, and to consider only 
such Causes, as have visible Foundations in Nature ; leaving 
those that depend upon the mutable Minds, Opinions, Appe 
tites, and Passions of particular Men, to the Consideration of 
others." (Political Arithmetick, etc., London, 1699. Preface.) 
(A new edition of "The Economic Writings of Sir William 
Petty," edited by Chas. Henry Hull, has been published by the 
University Press at Cambridge, 1899. The above passage will 
be found in vol. I., p. 244. The further references are given 
to this new, more accessible edition. Translator. ) His wonder 
ful keenness shows itself e. g. in the proposal to transport "all 
the moveables and people of Ireland, and of the Highlands of 
Scotland . . . into the rest of Great Britain." Thereby 
much labor-time would be saved, the productivity of labor in- 


main more or less fruitless as in the case of his con 
temporary, Hobbes, but leads up to his Political Arith 
metic, the first form in which Political Economy is dif 
ferentiated as an independent science. 

He defines exchange value, however, just as it appears 
in the process of exchange of commodities, viz. as 
money ; and money he defines as an existing commodity, 
gold and silver. Laboring under the ideas of the mone 
tary system, he declares the special branch of labor which 
is devoted to the production of gold and silver as the 
labor which determines exchange value. What he really 
means is that the labor of members of society must pro- 

ereased. and the King arid his Subjects would thereby become 
more Rich and Strong." (Political Arithmetick, ch. 4, p. 285.) 
Or in the chapter of his Political Arithmetic in which he 
proves that England s mission is the conquest of the world s 
market at a time when Holland still played the leading part 
HS a trading nation and France seemed to be on the way of 
becoming the ruling trading Power: "That the King of Eng 
land s Subjects, have Stock competent and convenient, to drive 
the Trade of the whole Commercial World" (I. c., ch. 10, p. 
311). "That the Impediments of England s greatness are but 
contingent and removable" (1. c., ch. 5, p. 298). A singular 
humor pervades all his writings. Thus, he shows that it was 
by material means that Holland at that time the model coun 
try with English economists, just as England is with conti 
nental economists to-day conquered the world market "with 
out such Angelical Wits and Judgments, as some attribute to 
the Hollanders" (1. c., p. 258). He advocates "Liberty of 
Conscience" as a condition of trade, because "Dissenters . . . 
are . . . patient Men. and such as believe that Labour and 
Industry is their Duty towards God," and "They believe that 
. . . for those who have less Wealth, to think they have 


duce not direct use-values, but commodities or use-values 
which by means of exchange are capable of assuming 
the form of gold and silver, i. e. of money, i. e. 
of exchange value, i. e. of embodiments of universal 
labor. His example, however, shows strikingly that the 
recognition of labor as the source of material wealth by 
no means excludes the misconception of the particular 
social form in which labor constitutes the source of ex 
change value. 

In his turn, BOISGUILLEBERT, if not consciously, 
at any rate actually reduces the exchange value of a com 
modity to labor-time, since he determines "true value" 
(la juste valeur) by the right proportion in which the 
labor-time of individuals is distributed among the sev 
eral branches of industry, and defines free competition 
as the social process which determines these correct pro 
portions. At the same time, however, and in contrast 

the more Wit and Understanding, especially of the things of 
God which they think chiefly belong to the Poor." "From 
whence it follows that Trade is not fixt to any species of Re 
ligion as such ; but rather ... to the Heterodox part of 
the whole" (1. c., p. 262-264). He advocates an "allowance 
by Publick Tax" for those "who live by begging, cheating, 
stealing, gaming, borrowing without intention of restoring," 
because "it were more for the publick profit" to tax the 
country for such persons "than to suffer them to spend ex 
travagantly, at the only charge of careless, credulous, and 
good natured People" (p. 269-270). But he is opposed to 
taxes which transfer the wealth from industrious people "to 
such as do nothing at all, but eat and drink, sing, play, and 
dance ; nay such as study the Metaphysicks" ( ibid. ) . Petty a 
writings are rarities of the bookseller s trade and are to be 
found only in scattered poor old editions, which is the more 


with Petty he wages a fanatical war against money 
which, by its interference, disturbs the natural equili 
brium or harmony of exchange of commodities and, like 
a wanton Moloch, demands all natural wealth as sacri 
fice. It is true that this assault on money was called 
forth by certain historic conditions. Since Boisguille- 
bert attacked 1 the blind destructive lust after gold which 
possessed the court of Louis XIV, his tax collectors, and 
his nobility; on the other hand, Petty extolled in the 
greed of gold the mighty impulse which spurred on the 
nation in her industrial development and in her conquest 

surprising since William Petty was not only the father of 
English Political Economy, but also the ancestor of Henry 
Petty, alias Marquis of Lansdowne, the nestor of the Eng 
lish Whigs. However, the Lansdowne family could hardly 
bring out a complete edition of Petty s works without pre 
facing it with his biography, and what can be said of most 
origines of the great Whig families holds good also in this 
ease, viz., "the less said of them the better." The keen-witted 
but cynical army surgeon who was as ready to plunder in Ire 
land under the shield of Cromwell as to crawl before Charles II. 
to get the title of baron which he needed for his plunderings, 
is a model hardly fit for public exhibition. Besides that, Petty 
peeks to prove in most of his writings which he published in his 
lifetime, that England s prosperity reached its climax under 
Charles II., a heterodox view for the hereditary exploiters of 
the "glorious revolution." 

1 In contrast with the "black art of finance" of his time, 
Boisguillebert says: "La science tinanciere n est que la con- 
naissance approfondie des intfirets de 1 agriculture et du com 
merce." Le Detail de la France, 1097. Eugene Daire s edition 
of Economistes financiers du XVIII. sifecle, Paris, 1843, vol. I., 
p. 241. 


of the world-market; still, there asserts itself here a 
deeper antagonism of principles which constantly re 
curs between true English and true French l Political 
Economy. Boisguillebert sees, in fact, only the material 
substance of wealth, its use-value, the enjoyment * of it, 
and considers the capitalistic form of labor, i. e. the 
production of use-values as commodities and the ex 
change of those commodities, as the natural social form 
in which individual labor attains its end. When he is, 
therefore, confronted with the specific character of capi 
talistic wealth as in the case of money, he sees in it the 
usurping interference of extraneous elements and gets 
into a rage about the capitalist system of labor in one 
form while utopian-like he praises it in another. 3 
Boisguillebert furnishes us with proof that one may 

1 But not Romance Political Economy, since the Italians re 
produce the contrast between the English and French econo 
mists in the two respective schools of Naples and Milan, while 
the Spaniards of the earlier period are either pure Mercan 
tilists; modified mercantilists like Ustariz; or, like Jovellanos 
(see his Obras, Barcelona, 1839-40), hold to the "golden mean" 
with Adam Smith. 

1 "La veritable richesse . . . jouissance entiere, non 
seulement des besoins de la vie, mais m&me de tous les super- 
flus et de tout, ce qui peut fair plaisir & la sensualit6," Bois 
guillebert, "Dissertation Bur la nature de la richesse," etc., 
L c., p. 403. But while Petty was a frivolous, rapacious and 
unprincipled adventurer, Boisguillebert, though an intendant 
under Louis XIV, championed the interests of the oppressed 
classes with a daring that was equal to his keenness of mind. 

The French Socialism of the Proudhon type suffers from 
the same national hereditary disease. 


treat labor- time as the measure of value of commo 
dities, and at the same time confound labor embodied 
in the exchange value of commodities and measured by 
time, with the direct natural activity of individuals. 

The first sensible analysis of exchange value as labor- 
time, made so clear as to seem almost commonplace, is 
to be found in the work of a man of the New World 
where the bourgeois relations of production imported 
together with their representatives sprouted rapidly in 
a soil which made up its lack of historical traditions 
with a surplus of humus. That man was BENJAMIN 
FRANKLIN, who formulated the fundamental law of mod 
ern polTHcal economy 1 in kis first work which he wrote 
when a mere youth and published in 1721. 

He declares it necessary to look for another measure 
of value than precious metals. That measureisjf 
"By labor may the value of silver be measureoas well as 
other things. As, suppose one man employed to raise 
corn, while another is digging and refining silver ; at the 
year s end, or at any other period of time, the complete 
produce of corn, and that of silver, are the natural price 
of each other; and if one be twenty bushels, and the 
other twenty ounces, then an ounce of that silver is worth 
the labor of raising a bushel of that corn. Now if by 
the discovery of some nearer, more easy or plentiful 
mines, a man may get forty ounces of silver as easily as 
formerly he did twenty, and the same labor is still re- 

1 "Benjamin Franklin, The Works of, etc.," ed. by I. Sparks, 
vol. II., Boston, 1836. "A Modest Inquiry into the Nature and 
Necessity of a Paper Currency." 


quired to raise twenty bushels of corn, then two ounces 
of silver will be worth no more than the aame labor of 
raising one bushel of corn, and that bushel of corn will 
be as cheap at two ounces, as it was before at one, ceteris 
paribus. Thus the riches of a. country.. are to be-yalned 
by the quantity of labor its inhabitants are abla_to_pur- 
chase." 1 Thus Franklin regards labor-time from the one 
sided economic point of view, as the measure of value. 
The transformation of actual products into exchange 
values is self-evident with him and the only question is as 
to finding a quantitative measure of value. "Trade," says 
he, "in general being nothing else but the exchange of 
labour for labour, the value of all things is, as I have 
said before, most justly measured by labour." 2 Substi 
tute the word "work" for "labor" in the above statement, 
and the confusion of labor in one form and labor in an 
other form becomes at once apparent. Since trade con 
sists e. g. in the exchange of the respective labors of the 
shoemaker, miner, spinner, painter, etc., does it follow 
that the value of shoes is most justly measured by the 
work of a painter? On the contrary, Franklin meant 
that the value of shoes, mining products, yarn, paintings, 
etc., is determined by abstract labor which possesses no 
particular qualities and can, therefore, be measured only 
quantitatively. 3 But since he does not develop the idea 
that labor contained in exchange value is abstract uni- 

1 L. c., p. 265. 
L. c., p. 287. 

1 L. c., "Remarks and Facts relative to the American Paper 
Money," 1764. 


versaLJabqr sthich assumes the _fp_rra_of sociaHaDor as a 
re&ult of the universal alienation of the. products of in 
dividual labor, he necessarily fails to recognize in money 
the direcf embodiment of this alienated labor. For that 
reason he sees no inner connection between money and 
labor which creates exchange value, and considers money 
merely as an instrument introduced from outside into 
the sphere of exchange for purposes of technical con 
venience. 1 Franklin s analysis of exchange value did 
not exert any direct influence on the general trend of 
science, because he discussed only special questions of 
political economy whenever there was a definite practical 
occasion for it. 

The contrast between useful work and labor which 
creates exchange value agitated all Europe during the 
eighteenth century in the form of this question : what 
particular kind of labor constitutes the source of bour 
geois wealth ? It was thus assumed that not every kind 
of labor which is realized in use-values or yields certain 
products does thereby directly create wealth. With the 
physiocrats, however, as well a? with their opponents, 
the burning question was not, what kind of labor creates 
value, but which is it that creates surplm value. They 
approached the problem in its complicated form before 
they had solved it in its elementary form ; such is the 
historical course of all sciences leading them bv a 
labyrinth of intersecting paths to the real starting points. 
Unlike other builders, science not only erects castles in 

1 See "Papers on American Politics ; Remarks and Facts 
relative to the American Paper Money." 1764, 1. c. 


the air, but constructs separate stories of the building, 
before it has laid the foundation. Without dwelling 
any longer on the physiocrats and omitting quite a num 
ber of Italian economists who in some more or less in 
genious ideas came close to a correct analysis of the na 
ture of commodity, 1 we pass at once to the first Briton 
who elaborated the general system of bourgeois econ 
omics, Sir JAMES STEUART.* His idea of exchange value 
as well as all the abstract categories of political economy 
still seem to be with him in the process of differentiation 
from the material elements they represent and therefore 
appear quite vague and unsettled. In one place he de 
termines real value by labor-time ("what a workman can 
perform in a day* ), but immediately creates confusion 
by introducing the elements of wages and raw material.* 
In another place his struggle with the material sub 
stance of the subject he treats of is revealed even more 

1 See e. g. Galiani, "Delia Moneta," in vol. 3 of Scrittori 
Classici italiani di Economia politica (Published by Custodi). 
Parte Moderna, Milano, 1803. "La fatica, he says, e Tunica 
che da valore alia cosa" ("only effort can give value to any 
thing"). The designation of labor as "fatica," strain, effort, 
is characteristic of the southerner. 

Steuart s work, "An Inquiry into the Principles of Political 
Economy, being an Essay on the Science of Domestic Policy in 
Free Nations," appeared first in London in two quarto vol 
umes in the year 1767, ten years before Adam Smith s "Wealth 
of Nations." I quote from the Dublin edition of 1770. (The 
references to pages are the same for the standard London edi 
tion of 1767, except where otherwise stated. Translator.) 

Steuart, 1. c., vol. I., p. 181-183. 


strikingly. He cans the material of nature contained 
in a commodity, such as the silver in a silver plate, its 
"intrinsic worth," while the labor-time contained in it he 
calls "useful value." The former, he says "is . . . 
something real in itself/ while "the value of the second 
must be estimated according to the labour it has cost to 
produce it. ... The labour employed in the modi 
fication [of the substance] represents a portion of a 
man s time." 1 

What distinguishes Steuart from his predecessors and 
followers is his keen differentiation between specifically 
social labor which is represented in exchange value, and 
concrete labor which produces use-values. Labor, he says, 
which through its alienation creates a universal equival 
ent, I call industry. Labor as industry he distinguishes 
not only from concrete labor, but from all other social 
forms of labor. 2 It is to him the capitalistic form of 
labor in contrast to its antique and mediaeval forms. 
He is especially interested in the difference between cap 
italistic and feudal labor, of which he had observed the 
latter in its decaying forms both in Scotland and on his 
extensive travels over the continent. Steuart knew, of 
course, very well that products took on the form of com 
modities and commodities, the form of money in pre- 
capitalistic epochs as well ; but he proves conclusively 
that it is only in the capitalistic period of production 
that the commodity becomes the elementary and funda- 

1 Steuart, 1. c., vol. I., p. 361-362. 

See chapter I., book II., vol. I. "of the reciprocal conner 
tions between Trade and Industry" (Translator}. 


mental form of wealth, and alienation [of commodities], 
the ruling form of acquisition and that consequently 

1f}vvrj^PflfiTigr >X 

in^its character. 1 

After different forms of concrete labor, such as agri 
culture, manufacture, navigation, trade, etc., had each 
in turn been declared the true source of wealth, ADAM 
SatLm proclaimed labor in general, and namely mTfo 
general social form of division of labor, to be the only 
source of material wealth or use-values. While ignoring 
in connection with the latter the part played by nature, 
he is troubled by it when he comes to deal with purely 
social wealth i. e. exchange value. To be sure, Adam de 
termines the value of a commodity by the labor-time 
contained in it, but relegates the actual application of 
the principle to pre-Adamic times. In other words, 
what seems to him true from the standpoint of simple 
commodity, ceases to be clear as soon as the higher and 
more complex forms of capital, wage-labor, rent, etc. 
take its place. This He expresses by saying, that the 
value of commodities used to be measured by labor-time 
in the paradise lost of bourgeois society, in which men 

1 He declares, therefore, the patriarchal form of agriculture 
which is devoted to the direct production of use-values for the 
owner of the land, to be an "abuse," not in Sparta, or Rome, 
or even in Athens, but in the industrial countries of the eigh 
teenth century. This "abusive agriculture" is not "trade," but 
a "direct means of subsisting." Just as capitalistic agriculture 
clears the country of superfluous mouths, so does the capital 
istic mode of manufacture clear the factory of superfluous 


dealt with each other not as capitalists, wage-workers, 
landlords, tenants, usurers, etc., but merely as plain pro 
ducers of commodities which they exchanged. He con 
stantly confuses the determination of the value of com 
modities by the labor-time contained in them with the 
determination of their value by the value of labor. He 
becomes confused in working out the details and fails 
to see the objective equalization of different kinds of labor 
which the social process forcibly carries out, mistaking 
it for the subjective equality of the labors of individuals. 
The transition from concrete labor to labor creating ex 
change value, i. e. to labor in its fundamental capitalistic- 
form he tries to derive from the division of labor. Yet, 
while it is true that private exchange implies the divis 
ion of labor, it is false to maintain that division of labor 
implies private exchange. Among the Peruvians, e. g., 
labor was divided to an extraordinary extent, although 
there was no private exchange, no exchange of products, 
as commodities. 

1 Thus e. g., Adam Smith says : "Equal quantities of labour, 
at all times and places, may be said to be of equal value to the 
labourer. In his ordinary state of health, strength and spirits, 
in the ordinary degree of his skill and dexterity, he must al 
ways lay down the same portion of his ease, his liberty, and his 
happiness. The price which he pays must always be the same, 
whatever may be the quantity of goods which he receives in 
return for it. Of these, indeed, it may sometimes purchase a 
greater and sometimes a smaller quantity; but it is their value 
which varies, not that of the labour which purchases them. 
. . . Labour alone, therefore, never varying in its own 
value ... is their f commodities ] real price, etc. Adam 
Smith (Book T.. ph. V., p. 34. Oxford, 1800. Translator.) 


Contrary to Adam Smith, DAVID RICARDO elaborated 
with great clearness the determination of the value of 
a commodity by labor-time and showed that this law gov 
erns also such relations of capitalistic production which 
seem to contradict it most. Ricardo confines his inves 
tigations exclusively to the quantitative determination of 
value and as regards the latter he is at least conscious of 
the fact that the realization of the law depends upon cer 
tain historical conditions. He says, namely, that the de 
termination of value by labor-time holds good for com 
modities "only as can be increased in quantity by the 
exertion of human industry, and on the production of 
which competition operates without restraint." 1 What 
he really means is that the law of value presupposes for 
its full development an industrial society in which pro 
duction is carried on a large scale and free competition 
prevails, i. e. the modern capitalist society. In all other 
respects, Ricardo considers the capitalist form of labor 
as the eternal natural form of social labor. He makes 
the primitive fisherman and the primitive hunter 
straightway exchange their fish and game as owners of 
commodities, in proportion to the labor-time embodied 
in these exchange values. On this occasion he commits 
the anachronism of making the primitive fisherman and 
primitive hunter consult the annuity tables in current 
use on the London Exchange in the year 1817 in the cal 
culation relating to their instruments. The "parallelo 
grams of Mr. Owen" seem to be the only form of society 

1 David Ricardo, "On the Principles of Political Economy and 
Taxation," 3rd edition, London, 1821, p. 3. 


outside of the bourgeois form with which he was ac 
quainted. Although confined within this bourgeois 
horizon, Ricardo analyzes the bourgeois economy which 
looks quite different to deeper insight than it does on 
the surface with such keen power of theoretical pene 
tration that Lord Brougham could say of him : "Mr. 
Ricardo seemed as if he had dropped from another 

In a direct controversy with Ricardo, SISMONDT 
lays stress upon the specifically social character of 
labor which creates exchange value, 1 and says it is 
"characteristic of our economic progress" to reduce 
the magnitude of value to the necessary labor- timo, 
to the relation between the demand of society as 
a whole and the quantity of labor which is suf 
ficient to satisfy this demand.* Sismondi is no more 
laboring under Boisguillebert s idea, that labor which 
creates exchange value is adulterated by money ; but just 
as Boisguillebert denounced money, so does Sismondi de 
nounce large industrial capital. In Ricardo political 
economy reached its climax, after recklessly drawing its 
ultimate conclusions, while Sismondi supplemented it by 
impersonating its doubts. 

Since Ricardo gave to classical political economy its 

1 Sismondi, "Etudes aur 1 Economic Politique," t. II., Brux- 
elles, 1837. "C est 1 opposition entre la valeur usuelle . 
ct la valeur exchangeable & laquelle le commerce a reduit toute 
chose," p. 161. [Paris edition, p. 229, Transl.] 

Sismondi 1. c., p. 163-166 seq. [Paris edition, 230 etf. 

final shape, having formulated and elaborated with the 
greatest clearness the law of the determination of ex 
change value by labor-time, it is natural that all the 
polemics among economists should center about him. 

V Stripped of its puerile 1 form this controversy comes 

?" down to the following points: 

v First : Labor itself has exchange value, and different 
kinds of labor have different exchange values. We get 
into a vicious circle by making exchange value the meas 
ure of exchange value, because the measuring exchange 
value needs a measure itself. This objection may be 
reduced to the following problem : Given labor-time as 
the intrinsic measure of exchange value, develop from 
that the determination of wages. The theory of wages 
gives the answer to that. 

-^ Second : If the exchange value of a product is equal 
to the labor-time contained in it, then the exchange value 
of one day of labor is equal to the product of that labor. 
In other words, wages must be equal to the product of 
labor. 2 But the very opposite is actually the case. Ergo. 

1 Perhaps the silliest to be found are the annotations of J. B. 
Say to the French translation of Ricardo, made by Constancio, 
and the most pedantically arrogant are the remarks of Mr. 
MacLeod in his newly published "Theory of Exchange," Lon 
don, 1858. 

1 This objection raised against Ricardo by bourgeois econ 
omists was taken up later by the socialists. Having assumed 
the correctness of the formula, they charged the practice with 
contradiction to the theory and appealed to bourgeois society 
to realize in practice the conclusions which were supposed to 
follow from its theoretical principles. That was at least the 

this objection comes down to the following problem : 
How does production, based on the determination of 
exchange value by labor-time only, lead to the result 
that the exchange value of labor is less than the exchange 
value of its product? This problem is solved by us in 
the discussion of capital. 

Third: The market price of commodities either falls 
below or rises above its exchange value with the changing 
relations of supply and demand. Therefore, the ex 
change value of commodities is determined by the rela 
tion of supply and demand and not by the labor-time 
contained in them. As a matter of fact, this queer con 
clusion merely amounts to the question, how a market 
price based on exchange value can deviate from that ex 
change value; or, better still, how does the law of ex 
change value assert itself only in its antithesis? This 
problem is solved in the theory of competition. 

Fourth : The last and apparently the most striking 
objection, if not raised in the usual form of queer ex 
amples: If exchange value is nothing but mere labor- 

way in which the English socialists turned Ricardo s formula 
of exchange value against political economy. It remained for 
Mr. Proudhon not only to proclaim the fundamental principle 
of old society as the principle of the new, hut also to declare 
himself the discoverer of the formula in which Ricardo summed 
up the combined results of classical English political economy. 
It has been proven that the utopian interpretation of the Ri- 
pjirdian formula was about forgotten in England when Mr. 
Proudhon "discovered" it on the other side of the Canal. (Cf. 
my work: "Misere de la Philoeophie." c*c.. Paris, 1847, para 
graph on la valeur constitute.) 

time contained in commodities, how can commodities 
which contain no labor possess exchange-value, or in 
other words, whence the exchange value of mere forces 
of nature? This problem is solved in the theory of rent. 


In a parliamentary debate on Sir Eobert Peel s Bank 
Act of 1844 and 1845, Gladstone remarked that not even 
love has made so many fools of men as the pondering 
over the nature of money. He spoke of Britons to 
Britons. The Dutch, on the contrary, who, from times 
of yore, have had, Petty s doubts notwithstanding, 
"angelical wits" for money speculation have never lost 
their wits in speculations about money. 

The main difficulty in the analysis of money is over 
come as soon as the evolution of money from commodity 
is understood. This point once granted, it only remains 
to comprehend clearly the particular forms of money, 
which is to some extent made difficult by the fact that 
all bourgeois relations, being gilt or silver plated, have 
the appearance of money relations, and money, therefore, 
seems to possess an endless variety of forms, which have 
nothing in common with it. 

Tn the following investigation only those forms of 


money are treated of which directly grow out of the ex 
change of commodities; the forms which belong to a 
higher stage of production, as e. g., credit money will 
not be discussed here. For the sake of simplicity gold 
is assumed throughout as the money commodity. 


The first process of circulation constitutes, so to say, 
the theoritical preparatory process to actual circulation. 
To begin with, commodities which are use-values by 
nature, acquire a form in which they appear in idea to 
each other as exchange values, as definite quantities of 
incorporated universal labor-time. The first necessary 
step in this process is, as we have seen, the setting apart 
by the commodities of a specific commodity, say gold, as 
the direct incarnation of universal labor-time, or the uni 
versal equivalent. Let us go back for a moment to the 
form in which commodities turn gold into money. 

1 ton of iron = 2 ounces of gold 

1 quarter of wheat = 1 ounce of gold 

1 hundred weight of Mocca coffee = 1-4 ounce of gold 

1 hundred weight of potash = y* ounce of gold 

1 ton of Brazil timber = \ l / 2 ounces of gold 

Y commodities = X ounces of gold 

In the above series of equations iron, wheat, coffee, 
potash, etc. appear to each other as einJ3odimfin_ts_ of 
homogeneous labor, namely, as labor materialized in 
money, from which all the peculiarities of the different 
kinds of concrete labor represented in the different use- 
values are completely eliminated. As value they arc all 


identical, they are the inna mating pf the SOJOLP. 1nbnr ; or 
the same incarnation of labor, viz., ffold. As uniform em 
bodiments of the same labor they display only one differ 
ence, a quantitative one, by appearing as different quan 
tities of value, because unequal quantities of labor-time 
are contained in their use-values. The mutual relation 
pf these separate commodities is that of embodiments of 
universal labor-time, since they are related to universal 
labor-time as to an excluded commodity, viz., gold. The 
same relation the development of which causes commodi 
ties to appear to each other as exchange values, causes 

the labor time ^contained in ggld to appear as 

universal labor-time, a given quantity of which is 
expressed in differeht~T}uantities of iron, wheat, coffee, 
etc, in short, in the use-values of all commodities, or is 
directly unfolded in the endless series of commodity- 
equivalents. While all commodities express their ex 
change values in gold, gold expresses its exchange value 
directly in all commodities. While commodities assume 
the form of exchange value in relation to each other, 
they lend to gold the form of the universal equivalent, 
or of money. 

I Gold becomes the measure of value, because all com 
modities measure their exchange values in gold, in 
proportion as a certain quantity of gold and a 
certain quantity of the commodity contain the same 
amount of labor-time; and it is only by virtue of this 
function of being a measure of value, in which capacity 
its own value is measured directly in the entire series of 
commodity equivalents, that gold becomes a universal 
equivalent or money. On the other hand, the exchange 

value of all commodities is expressed in gold. \ In this 
expression, the qualitative aspect is to be distinguished 
from the quantitative : there is the exchange value of the 
commodity as the embodiment of the same uniform 
labor-time; while the magnitude of value is exhaustively 
expressed, since in the same proportion in which com 
modities are equated to gold they are equated to one an 
other. On the one hand the universal character of the 
labor-time contained in them is revealed: on the other, 
its quantity is expressed in its golden equivalent. The 
exchange value of commodities thus expressed in the 
form of a universal equivalent and, moreover, as a 
numerical proportion of this equivalent, in terms of one 
specific commodity, or represented in the form of a series 
of commodities equated to one specific commodity, is 
PRICE. Price is the form into which the exchange value 
of commodities is converted when it appears within the 
sphere of circulation. 

/By the same process by which commodities express 
their values in gold prices, they turn gold into a measure 
of value i. e. into money. If all of them were to measure 
their values in silver, wheat, or copper, and therefore 
express them in the form of silver, wheat or copper 
prices, then silver, wheat or copper would be measures of 
value and consequently universal equivalents. In order 
to appear as prices in circulation, commodities must be 
exchange values before they enter circulation. Gold be- 
eQmGK the measuxe._QjLvflhie only. because all cmmn odiHes 
a estimate their exchange value injt. 

The universality of this relation which is the result of 
evolution and from which alone springs the function of 


gold as the measure of value, implies however, that every 
single commodity is measured in gold, in proportion to 
the labor-time contained in both; that tn^LdjiaXj^oru.- 
mon measure of the commodity and of gold is labor ; or 
that commodity and gold are passed for each dtHeT in 
direct barter as equal exchange values. How this 
equalization actually takes place, can not be discussed 
here when treating of simple circulation. So much, 
however, is clear, that in countries producing gold and 
silver, certain quantities of labor-time are directly em 
bodied in definite quantities of gold and silver, while in 
countries which do not produce gold and silver the same 
result is reached in a round-about way, by direct or in 
direct exchange of the commodities of those countries ; 
i. e. a definite portion of average national labor is given 
for a definite quantity of labor-time, embodied in the gold 
and silver of the mine-owning countries. In order to bo 
able to serve as a measure of value, gold must be as far 
as possible a variable value, because it can become the 
equivalent of other commodities only as an incarnation 
of labor-time, and the same labor-time is realized in 
unequal volumes of use-values with the change in the pro 
ductive power of concrete labor. Tn^sjimaHng all com 
modities in gold it is only assumgd_ that gold, represents 
a given quantity of labor at a given moment, as was done 
when the exchange value of any commodity was ex 
pressed in terms o$ the pse-valae of any -other" com- 

^_ tt 

mqdjtv. As for the variations of the value of gold, the 
law of exchange value formulated above holds good in 
its case as well. If the exchange value of commodities 
remains unchanged, then a general rise in their gold 


prices is possible only in the case of a fall in the ex 
change value of gold. If the exchange value of gold re 
mains unchanged, a general rise of gold prices is pos 
sible only when the exchange value of all commodities 
rises. The reverse is true in case of a general fall in the 
prices of commodities. If the value of an ounce of gold 
falls or rises in consequence of a change in theTabof^time 
required for its "production, then the values of all other 
commodities fall or rise to an equal extent. Thus, the 
ounce of gold represents after the change, as it did be 
fore, a given quantity of labor-time with regard to all 
commodities. The same exchange values are now esti 
mated in greater or smaller quantities of gold than be 
fore, but they are estimated in proportion to the mag 
nitude of their values, and consequently retain the same 
proportion to each other. The ratio 2 -4- 4 -4- 8 re 
mains the same when expressed as 1 -4- 3 -4-4 or as 
4-4-8-4- 16. The change in the quantity of gold in 
which exchange values are estimated with a variation in 
the value of gold, interferes as little with the function 
of gold as a measure of value, as the fifteen times smaller 
value of silver as compared with that of gold interferes 
with the performance of that function by the latter. 

| Since labor-time is the common measure of gold and 
commodities, and since gold figures as the measure of 

( value only in so far as all commodities are measured by 
it, the idea that money makes commodities commen 
surable, is therefore a mere fiction of the process of 
circulation. 1 It is rather. jthejcommensurability of com- 

1 True, Aristotle sees that the exchange value of commodities 
underlies their prices : " ^ jAAa-yJ, V *p\v ri vt^m* Am, fljAor- 


moditiesjas incorporated labor-time, that turns gold into 
money. \ 

^Commodities enter the process of exchange in the con 
crete form of use-values. They are yet to be turned 
into the real universal equivalent through their aliena 
tion. The determination of their prices merely amounts 
to their ideal transformation into the universal equiv 
alent, a process of equation to gold which is yet to be 
realized. But since commodities are, in their prices, 
transformed into gold only in imagination, or are con 
verted only into imaginary gold, and since their money 
form is not differentiated as yet from their concrete 
selves, it follows that gold has also been turned into 
money only in imagination; it appears so far but as a 
measure of value, and in fact definite quantities of gold 
serve merely as names for certain quantities of labor- 
time. The form in which gold is crystallized in money 

tia<t>tptt. yip ovSev Jj i K\lvai wtvrt atri oixi af, rj o<rov ai vevre jcAtfat." It 13 

clear that exchange existed before coin. For it does not make 
any difference whether you give five beds for a house, or as 
much money as five beds are worth"). On the other hand. 
since commodities acquire only in price the form of exchange 
value with respect to one another, he makes them commensur 
able through, money. " Aib Sel navra. Tm/uiTjcrOai ovrw yap ai ivrat, A- 
Aay>), i Si rovre, icoixwrta. To Jij vofjuvfia. tairirtp fifrpov iroiTJa-ay i<rofet, 
OUT* yap av juj) ov<r>jt aAAayijs xoivuvia V. " T aAAayij i<ronjTOS ^IT) ov<n^, ovriao- 

TV, MI ouri, <rv M/ Tpia S .-- ("Therefore all has to be appraised. 
In that way exchange may always take place, and, with 
it, society can exist. Coin, like measure, makes every 
thing commensurable and equal, for without exchange there 
would be no society, without equality there would be no 
exchange, and without commensurability, no equality.") 
He does not conceal from himself that these different 
objects measured by money are entirely incommensurable 


always depends upon the way in which commodities ex 
press their own exchange value to each other. 

Commodities now confront one another in a double 
capacity: actually as use-values, ideally as exchange 
values. ^The twofold aspect of labor_conta,jned in them 
is reflected in_their mutual relations; the special con 
crete labor being virtually present as their .use-value, 
wliilejunivej^^abstract labor-time is ideally represented 
in their price in which commodities appear as com 
mensurable embodiments of the same value substance 
differing m^e^ejy_jn_pjiantityj 

The difference between exchange value and price ap 
pears to be merely nominal or, as Adam Smith says, 
labor is the real price, and money the nominal price of 
commodities. Instead of estimating the value of one 
quarter of wheat in thirty days of labor, it is estimated 
in one ounce of gold if one ounce of gold is the product 
of thirty days* labor. However, far from this difference 
being merely nominal, all the storms which threaten 
commodities in the actual process of circulation center 
about it. Thirty days of labor are contained in a quarter 

quantities. What he is after is the common unit of commodities 
as exchange values, which as an ancient Greek he was unable 
1o find. He gets out of the difficulty by making commensurable 
through money what is in itself incommensurable, so far a* it 
is necessary for practical purposes. ~r p)v our <Ui|0ci? Uvrarovra - 

("In truth it is impossible to make things that are so different. 
commensurable, but for practical purposes it is permissible.") 
Aristotle, Ethica Nicomacbea. 1. 5, c. 8, edit. Bekkeri, Oxonii, 

81 ~ 

of wheat and it need not, therefore, be expressed in terms 
of labor-time. But gold is a commodity distinct from 
wheat, and only in circulation it can be ascertained, 
whether the quarter of wheat can be actually turned 
into an ounce of gold as is anticipated in its price. 
That will depend on whether or not it proves to be a use- 
value, whether or not the quantity of labor-time con 
tained in it is the quantity necessarily required by 
society_jfor the production of a quarter of wheat. The 
commodity as such is an exchange value, it has a price. 
In this difference between exchange value and price lies 
the demonstration of the fact that the particular in 
dividual labor contained in a commodity has first to be 
expressed through the process of alienation in terms of 
its counterpart, i. e. as impersonal, abstract, universal 
and, only in that form, social labor, viz. money. Whether 
it can be so expressed seems to be a matter of chance. 
Thus, although the exchange value of a commodity finds 
only ideally a distinct expression in price, and the two 
fold character of labor contained in the commodity ex 
ists as yet merely as two distinct forms of expression, 
and, although in consequence thereof, the embodiment of 
universal labor-time, gold, confronts actual commodi 
ties only as an imaginary measure of value, yet the fact 
that exchange value exists as price, or that gold exists as 
a measure of value implies the necessity of the aliena 
tion of commodities for hard cash and the possibility 
of their non-alienation. In short, here lies latent the 
entire contradiction which is inherent in the fact that 
products are commodities or that the particular work of 
a private individual can be of no account in society 

until it has taken the very opposite form of abstract uni 
versal labor. For that reason, the Utopians, who want 
to have commodities but not money, who want a system 
of production based on private exchange without the 
necessary conditions underlying such a system, are con 
sistent when they "destroy" money not in its tangible 
form but in its nebulous illusory form of a measure of 
value. Under the invisible measure of value there lurks 
the hard cash. 

The process by which gold has become the measure 
of value and exchange value has been turned into price, 
being once assumed, all commodities express in their 
prices but imagined quantities of gold of various mag 
nitudes. As such various quantities of the same thing, 
gold, they are equated, compared and measured with 
each other, and thus arises the technical necessity of 
referring them to a definite quantity of gold as a unit 
of measure, a unit which develops into a standard 
measure by virtue of its divisibility into aliquot part*:, 
which in their turn can be sub-divided into aliquot parts. 1 
But quantities of gold as such are measured by weight. 

1 The peculiar circumstance that, while the ounce of gold 
serves in England sis the unit of the standard of money, it is 
not divided into aliquot parts has been explained as follows: 
"Our coinage was originally adapted to the employment of 
silver only hence an ounce of silver can always be divided 
into a certain adequate number of pieces of coin ; but as gold 
was introduced at a later period into a coinage adapted only 
to silver, an ounce of gold cannot be coined into an adequate 
number of pieces." Maclaren: "A Sketch of the History of the 
Currency," p. lf>. London. IR. S. 


The standard of measure is thus found ready in the gen 
eral measures of weight of metals and, therefore, where- 
ever metallic circulation is in vogue, these measures serve 
originally as standards of price. Since commodities no 
more relate to each other as exchange values to be 
measured by labor-time, but as magnitudes of the same 
denomination measured in gold, the latter is transformed 
from Sk~measure dfvatue"mio a sfarTdafd of "price. The 
comparison "of prices witE each other as different quanti 
ties of gold is thus crystallized in figures which corre 
spond to an assumed quantity of gold and represent it 
as a standard of aliquot parts. Gold as measure of value 
and as standard of price has entirely different forms 
of " manifestation and the c6nfusing or the two has 
resuReH m the wildest of theories. - Gold is -a 
el value as incorporated labor^time ; rtr 
the standard Of pTioa as a certain weight of 
GoT3 becomes the measure of value b 

virtue of its relation as exchange value to commodities 
as exchange values ; as standard of price, a definite quan 
tity of gold serves as a unit for other quantities of gold. 
Gold is the .measure i of yalue, because^ its value is variable ; 
it is J;be. standard iif .price, because it is fixed as a constant 
unit of _weight. In this case, as in all cases of measur 
ing quantities of the same denomination, the establish 
ment of a definite and unvarying unit of measure is all- 
important. The necessity of settling upon a quantity 
of gold as a unit of measure and upon its aliquot parts 
as subdivisions of that unit, has given rise to the notion 
that a certain quantity of gold which has naturally a 
variable value had been assigned a fixed ratio of value 

to the exchange values of all commodities; the fact_is 
overlooked that exchange values of commodities_are 
transformed into prices, i. e. into quantities of gold, be 
fore gold develops as a standard of price. No matter 
how the value of gold may vary, the" ratios between the 
values of different quantities of gold remain constant. 
Let the fall in the value of gold amount to 1000 per cent., 
still twelve ounces of gold will have a twelve times 
greater value than one ounce of gold; and in prices the 
only thing considered is the ratio between different quan 
tities of gold. Since, on the other hand, no rise or fall 
in the value of an ounce of gold can alter its weight, no 
alteration can take place in the weight of its aliquot 
parts. Thus_gold always renders-the game service-as- an 
invariable standard of price, no matter how much its 
value _may~ .vary - 1 

An historical process which, as we shall explain later, 
was determined by the nature of metallic circulation, led 
to the result that the same denomination of weight was 

1 "Money may continually vary in value and yet be as good a 
measure of value as if it remained perfectly stationary. Suppose. 
for instance, it is reduced in value. . . . Before the reduction, 
a guinea would purchase three bushels of wheat or 6 days 
labour; subsequently it would purchase only 2 bushels of wheat, 
or 4 days labour. In both cases, the relations of wheat and 
labour to money being given, their mutual relations can be 
inferred ; in other words, we can ascertain that a bushel of 
wheat is worth 2 days labour. This, which ia all that meas 
uring value implies, is as readily done after the reduction as 
before. The excellence of a thing as a measure of value is 
altogether independent of its own variableness in value" (p. 11, 
Bailey, "Money and its Vicissitudes." London, 1837). 

retained for a constantly changing and decreasing 
weight of precious metals in their function of a stand 
ard of price. Thus the English pound sterling denotes 
less than one-third of its original weight; the pound 
Scot, before the Union, only 1-36 ; the French livre, 1-74 ; 
the Spanish Maravedi, less than 1-1000 ; the Portuguese 
Rei, a still smaller fraction. Such was the historical 
origin of the discrepancy between the current money 
names of various weights of metals and their weight 
denominations. 1 Since the determination of the unit of 
measure, of its aliquot parts, and of their names is 
purely conventional, and since they should possess within 
the sphere of circulation the character of universality 
and compulsion, they had to be settled by law. The 
purely formal operation thus devolved upon the govern 
ment. 2 The metal which was to serve as the money ma- 

1 "Le monete lequali oggi sono ideali sono le piu antiche 
d ogni nazione, e tutte furono un tempo reali (the latter as 
sertion is too sweeping), e perche erano reali con ease ai con- 
tava." Galiani, "Delia Moneta," 1. c., p. 153 ("Coins which 
are ideal to-day [i. e., whose names no longer correspond to 
their value] are among the more ancient with every nation; 
at one time they were all real, and for that reason served for 
the purpose of counting.") 

"The romantic A. Miiller says: "According to our idea every 
independent sovereign has the right to name the metal money, 
and to give it a nominal social value, rank, standing and title 
(p. 276, v. II., A. H. Miiller, "Die Elemente der Staatskunst," 
Berlin, 1809). As far as title is concerned the Hon. Hofrath 
is right; but he forgets the substance. How confused hi.s 
"ideas" were, may be seen, e. g., from the following passage: 
"Everybody understands how much depends upon the right 

terial, was found already adopted in the community. In 
different countries the legal standard of price is natur 
ally different. In England e. g. the ounce as a weight 
of metal is divided into pennyweights, grains and carats 
Troy, but the ounce of gold as the unit of money is di 
vided into 3 7-8 sovereigns, the sovereign into 20 shill 
ings, the shilling into 12 pence, so that 100 pounds of 22 
carat gold (1200 ounces) : = 4672 sovereigns and 10 

determination of the mint-price, especially in a country like 
England, where the government with magnificent liberality 
coins money gratuitously ( Herr Miiller seems to think that 
the members of the English government defray the mint ex 
penses out of their own pockets), where it does not charge any 
mintage, etc., and thus if the mint-price of gold were set con 
siderably above its market price, if instead of paying as now 
3 17s. lOVgd. per 1 oz. of gold, it would set the price of an 
ounce of gold at 3 19s., all money would flow into the mint 
and exchanging for the silver contained there bring it into the 
market to be exchanged there for the cheaper gold; the latter 
would in the same manner be brought again to the mint and 
the entire coinage system would be upset" ( 1. c., p. 280-28 1 ) . 
To preserve order in English coinage, Miiller falls back on 
"disorder." While shilling and pence are mere names of cer 
tain parts of an ounce of gold represented by signs of silver 
and copper, he imagines that an ounce of gold is estimated in 
gold, silver and copper and thus confers upon the Englishmen 
the blessing of a triple standard of value. Silver as a measuro 
of money, next to gold, was formally abolished only in 181(5 
by 50 George III., c. 68. As a matter of fact, it was legally 
abolished as early as 1734 by 14 George II., c. 42, and still 
earlier by actual practice. There were two circumstances that 
made A. Miiller capable of a so-called higher conception of 
political economy: first, his wide ignorance of economic facts; 
second, his dilettanti-like visionary attitude toward philosophy. 


shillings. In the world market, however, where national 
boundaries disappear, these national characteristics of 
the measure of money also disappear and give place to 
the general measures of weight of metals. 

The price of a commodity or the quantity of gold into 
which it is ideally transformed, is, therefore, now ex 
pressed in the names of coins of the gold standard. Thus, 
instead of saying : a quarter of wheat is worth an ounce 
of gold, it is said in England to be worth 3 17s. W l / 2 &. 
All prices are thus expressed in the same denominations. 
The peculiar form which commodities lend to their 
exchange values is transformed into a money-denomina 
tion by which commodities tell each other how much they 
are worth. Money in its turn becomes money of ac 

We transform commodities into money of account, 
in our mind, on paper, in conversation, whenever it is 
a question of expressing any kind of wealth in terms of 
exchange value. 2 For that transformation we need the 
gold substance, but only in imagination. In order to 
estimate the value of a thousand bales of cotton in a 

i " Ai-a^ap<7is, wvv8a.rotJ.evov Tiros, rpbs TI oi*EAA7)V<9 \puvrau ry apyvpt w 

tint irpos TO ipifuflv." (Athen. Deipn. 1. IV. 49. v. 2, ed. Schweig- 
hSuser, 1802.) (When Anacharsis was asked for what purpose 
the Greeks used money, he replied, "For reckoning.") 

1 G. Gamier, one of the early French translators of Adam 
Smith, conceived the queer notion of fixing a proportion between 
the use of money of account and that of actual money. His 
proportion is 10 to 1. (G. Gamier, "Histoire de la Monnaie 
depuis les temps de la plus haute antiquite 1 ," etc., t. 1, p. 78.) 

certain number of ounces of gold and then to express 
this number of ounces in the denominations of the 
ounce, . s. d., not a single atom of gold is required. 
Thus, not a single ounce of gold was in circulation in 
Scotland before Robert Peel s Bank Act of 1845, al 
though the gold ounce, expressed in its English standard 
of account, 3 17s. lO^d., served as the legal standard 
of price. In a similar manner silver serves as standard 
of price in the trade between Siberia and China, althougb 
that trade virtually amounts to barter. It is, therefore, 
immaterial to money, as money of account, whether or 
not its entire unit of measure or the fractions thereof 
are really coined. In England, at the time of Wil 
liam the Conqueror, 1, then a pound of pure 
silver, and the shilling, 1-20 of a pound, existed 
only as money of account, while the penny, 1-240 
of a pound of silver, was the largest silver coin in ex 
istence. On the other hand, there are no shillings 
and pence in England to-day, although they are legal 
denominations for certain parts of an ounce of gold. 
Monev__as money of account may exist exclusively in 
idea, while the money in actual existence may be coined 
nrcnrf?iTigr fn" arijpTvHTqjy diffprnnt standard. Th"us the 
money in circulation in many English colonies of North 
America consisted until late in the eighteenth century 
of Spanish and Portuguese coins, although the money 
of account was throughout the same as in England. 1 

The act of Maryland in 1723 by which tobacco was made 
the legal standard, but its value reduced to terms of English 
gold money, namely one penny equal to one pound of tobacco, 


Owing to the fact that money, when serving as the 
standard of price, appears under the same reckoning 
names as do the prices of commodities, and that, there 
fore, the sum of 3 17s. lO^d. may signify, on the 
one hand, an ounce weight of gold, and on the other, 
the value of a ton of iron, this reckoning name of money 
has been called its mint-price. Hence, there sprang up 
the extraordinary notion that the value of gold is esti 
mated in its own material, and that, in contradistinction 
to all other commodities, its price is fixed by the State. 
It was erroneously thought that the giving of reckon- 
ning names to definite weights of gold is the same thing 
as fixing the value of those weights. 1 In so far as gold 
serves as one of the elements in determining price, i. e., 
where it performs the function of money of account, it 
not only has no fixed price, but has no price whatever. 
In order to have a price, i. e., in order to express itseU 
in a specific commodity as a universal equivalent that 
other commodity would have to play the same exclusive 

reminds of the "leges barbarorum," in which, inversely, certain 
sums of money were expressed in terms of oxen, cows, etc. In 
that case neither gold nor silver, but the ox and the cow were 
the actual material of the money of account. 

1 Thus, we read, e. g., in the "Familiar Words" of Mr. David 
Urquhart: "The value of gold is to be measured by itself; 
how can any substance be the measure of its own worth in 
other things? The worth of gold is to be established by its 
own weight, under a false denomination of that weight and 
an ounce is to be worth so many pounds and fractions of 
pounds. This is falsifying a measure, not establishing a 

. DO 

role in the process of circulation as gold. But two com 
modities excluding all other commodities mutually ex 
clude each other. Therefore, wherever gold and silver 
have by law been made to perform side by side the func 
tion of money or of a measure of value it has always been 
tried, but in vain, to treat them as one and the same ma 
terial. To assume that there is an invariable ratio between 
the quantities of gold and silver in which a given quantity 
of labor-time is incorporated, is to assume, in fact, that 
gold and silver are of one and the same material, and 
that a given mass of the less valuable metal, silver, is a 
constant fraction of a given mass of gold. From the 
reign of Edward III to the time of George II, the his 
tory of money in England consists of one long series of 
perturbations caused by the clashing of the legally fixed 
ratio between the values of gold and silver, with the 
fluctuations in their real values. At one time gold was 
too high ; at another, silver. The metal that for the time 
being was estimated below its value was withdrawn from 
circulation, melted and exported. The ratio between the 
two metals was then again altered by law, but the new 
nominal ratio soon came into conflict again with the 
real one. In our own times, the slight and transient 
fall in the value of gold compared with silver, which 
was a consequence of the Indo-Chinese demand for 
silver, produced on a far more extended scale in France 
the same phenomena, export of silver, and its expul 
sion from circulation by gold. During the years 1855, 
1856 and 1857, the excess in France of gold imports 
over gold exports amounted to 41,580,000, while the 
excess of silver exports over silver imports was 14,- 


704,000. In fact, in tftose countries in which both 
meiala are legally measures of value, and therefore both 
legal tender, so that every one has the option of paying 
in either metal, the metal that rises in value is at a 
premium, and, like every other commodity, measures 
its price in the over-estimated metal which alone serves 
in reality as the standard of value. The result of all 
experience and history with regard to this question is 
simply that, where two commodities perform by law 
the functions of a measure of value, in practice one 
alone maintains that position. 1 


The circumstance that commodities are converted 
into gold only in ideas as prices and that gold is there 
fore turned into money only in idea, gave rise to the 
theory of the ideal unit of measure of money. Since, 
in the determination of prices, gold and silver serve 
only ideally as money of account, it was asserted 
that the names pound, shilling, pence, thaler, franc, 
etc., instead of denoting certain weights of gold 
and silver or labor incorporated in some way, stood 
rather for ideal atoms of value. Thus, if, e. g., 

1 "Money is the measure of Commerce, and of the rate of 
everything, and therefore oiight to be kept (as all other meas 
ures) as steady and invariable as may be. But this cannot be, 
if your money be made of two Metals, whose proportion 
. . . constantly varies in respect of one another." John 
Locks; Some Considerations on the Lowering of Interest, etc., 
1691 (p. 166, p. 65 in his Works 7 ed., London, 1768, Tol. IIL 


the value of an ounce of silver should rise it would con 
tain more such atoms and would therefore have to be 
estimated and coined in a greater number of shillings. 
This doctrine, revived again during the last commercial 
crisis in England and even voiced in Parliament in two 
separate reports attached to the report of the select 
Committee on the Bank Acts sitting in July, 1858, dates 
from the end of the seventeenth century. 

At the time of the accession of William III., the Eng 
lish mint-price of an ounce of silver was 5s. 2d., or 1-62 
of an ounce of silver was equal to a penny ; 12 of these 
pence were called a shilling. According to that stand 
ard, a piece of silver weighing, say, 6 ounces, would be 
coined into thirty-one coins, each called a shilling. But 
the market price of an ounce of silver rose above its 
mint price, from 5s. 2d. to Gs. 3d., or, in order to buy 
an ounce of silver bullion Gs. 3d. had to be paid. How 
could the market price of an ounce of silver rise above 
its mint price, when the mint price is merely a reckon 
ing name for aliquot parts of an ounce of silver? The 
riddle was easily solved. Out of 5,600,000 of silver 
money which was in circulation at that time, four mil 
lions were worn out, clipped and debased. A trial dis 
closed that 57,000 of silver which were supposed to 
weigh 220,000 ounces, weighed only 141,000 ounces. 
The mint went on coining according to the same stand 
ard, but light- weighted shillings in actual circulation 
represented smaller parts of an ounce than their name 
implied. Hence, a greater quantity of these light- 
weighted shillings had to be paid in the market for an 
ounce of silver bullion. When a general recoinage was 


decided upon in consequence of the derangement that had 
been produced, LOWNDES, the Secretary of the Treas 
ury, declared that the value of an ounce of silver had 
risen and therefore it must henceforth be coined into 
(>s. 3d. instead of into 5s. 2d. as heretofore. His argu 
ment practically amounted to the assertion that the rise 
in the value of the ounce caused a fall in the value of its 
aliquot parts. His false theory, however, served merely 
as an embellishment for a just, practical purpose. The 
government debts were contracted in light shillings, 
were they to be paid in heavy ones ? Instead of saying 
pay back four ounces of silver, when you had received 
nominally five ounces but virtually only four, he said 
pay back nominally five ounces but reduce the metallic 
contents to four ounces and call a shilling what you 
had called four-fifths of a shilling heretofore. Thus 
Lowndes practically adhered to the metallic weight 
while theoretically he clung to the reckoning name. 
His adversaries who clung only to the name and there 
fore declared the 25 to 50 per cent, lighter shilling to 
be identical with the full-weight shilling maintained 
on the contrary that they adhered to the metallic weight. 
JOHN LOCKE, who was an advocate of the new bour 
geoisie in all forms, the manufacturers against the 
working classes and paupers, the commercial class 
against the old fashioned usurers, the financial aris 
tocracy against the state debtors, and who went so far 
as to prove in his own work that the bourgeois reason is 
the normal human reason, also took up the challenge 
against Lowndes. John Locke carried the day and 
money borrowed at ten or fourteen shillings to a guinea 


was repaid in guineas of twenty shillings. 1 SIR JAMES 
STEUART sums up the entire transaction as follows: 
"... the state gained considerably upon the score 
of taxes, as well as the creditors upon their capitals and 
interest; and the nation, which was the principal loser, 
was pleased; because their standard (The standard of 

Looke says among other things: "... call that a 
Crown now, which before . . . was but a part of a Grown 
. . . An equal quantity of Silver is always the same Value 
with an equal quantity of Silver. . . . For if the abating 
1-20 of the quantity of Silver of any Coin does not lessen its 
Value, the abating 19-20 of the quantity of the Silver of any 
Coin will not abate its Value. And so a single Penny, being 
called a Crown, will buy as much Spice, or Silk, or any other 
Commodity, as a Crown-Piece, which contains 20 times as 
much Silver. . . . Now [all that may be done] is giving a 
less quantity of Silver the .Stamp and Denomination of agreat- 
er. . . . But tis Silver and not Names that pay Debts 
and purchase Commodities" (1. c., p. 135-145 passim). If to 
raise the value of money means nothing but to give any de 
sired name to an aliquot part of a silver coin, e. g., to call an 
eighth part of an ounce of silver a penny, then money may 
really be rated as high as you please. At the same time, Locke 
answered Lowndes that the rise of the market price above the 
mint price was due not to the rise of the value of silver, but 
to the lighter silver coins. Seventy-seven clipped shillings do 
not weigh a particle more than 62 full-weighted ones. Finally 
he pointed out with perfect right that, aside from the loss of 
weight in the circulating coin, the market price of silver bul 
lion in England could rise to some extent above its mint price, 
since the export of silver bullion was allowed while that of 
silver coin was prohibited (1. c., p. 54-116 passim). Locke was 
exceedingly careful not to touch upon the burning question 
of public debts, and no less carefully avoided the discussion of 


their own value) was not debased." 1 Steuart thought 
that the nation would prove more alert with the further 
development of commerce. He was mistaken. About 
120 years later the same quid pro quo was repeated. 

It was just in the order of things that Bishop BERKE 
LEY, the representative of a mystical idealism in Eng 
lish philosophy, should have given a theoretical turn to 
the doctrine of the ideal unit of measure of money, some 
thing which the practical "Secretary to the Treasury" 
had failed to do. He asks : "Whether the terms Crown, 
Livre, Pound Sterling, etc., are not to be considered 
as Exponents or Denominations of such Proportion? 
| namely proportions of abstract value as such.] And 
whether Gold, Silver, and Paper are not Tickets or Count 
ers for Reckoning, Recording and Transferring thereof ? 
(of the proportion of value). Whether Power to com 
mand the Industry of others be not real Wealth? And 
whether Money be not in Truth, Tickets or Tokens for 
conveying and recording such Power, and whether it be 
of great consequence what Materials the Tickets are made 
of?" 2 Here we find a confusion, first of the measure of 

the delicate economic question, viz., the depreciation of the 
currency out of proportion to its real loss of silver, as was 
shown by the rate of exchange and the ratio of silver bullion 
to silver coin. We shall return to this question in its general 
form in the chapter on the Medium of Circulation. Nicholas 
Barbon in "A Discourse Concerning Coining the New Money 
Lighter, in Answer to Mr. Locke s Considerations, etc.," Lon 
don, 1696, tried in vain to entice Locke to difficult ground. 

1 Steuart, 1. c., v. II., p. 154. 

"The Querist, 1. c., (p. 5-6-7.) The "Queries on Money" are 
generally clever. Among other things Berkeley is perfectly 


value and the standard of price, and secondly of gold 
and silver as measures on the one hand and mediums 
of circulation on the other. Because precious metals 
can be replaced by tokens in the process of circulation 
Berkeley comes to the conclusion that these tokens rep 
resent nothing, i. e., only the abstract idea of value. 

SIR JAMES STEUART had so fully developed the 
theor} of the ideal unit of measure of money, that his 
successors unconscious successors since they do not 
know him have added to it neither a new version 
nor even a new example. "Money, which I call 
of account, is no more than an arbitrary scale of 
equal parts, invented for measuring the respective 
value of things vendible. Money of account, there 
fore, is quite a different thing from money coin, 
which is price 1 and might exist, although there was 
no such thing in the world as any substance which could 
become an adequate and proportional equivalent, for 
every commodity. . . . Money of account . . . 
performs the same office with regard to the value of 
things, that degrees, minutes, seconds, etc., do with 
regard to angles, or as scales do to geographical maps, 
or to plans of any kind. In all these inventions, there 
is constantly some denomination taken for the unit. 

right in saying that by their progress the North American 
colonies "make it plain as daylight, that gold and silver are not 
so necessary for the wealth of a nation, as the vulgar of all 
ranks imagine." 

1 Price means here real equivalent in the sense commonly 
employed by English economic writers in the seventeenth cen 


. . . The usefulness of all those invention* being 
solely confined to the marking of proportion. Just so 
the unit in money can have no invariable determinate 
proportion to any part of value, that is to say, it cannot 
be fixed to any particular quantity of gold, silver, or any 
other commodity whatsoever. The unit once fixed, we 
can, by multiplying it, ascend to the greatest value. 
. . . The value of commodities, therefore, depending 
upon a general combination of circumstances relative 
to themselves and to the fancies of men, their value 
ought to be considered as changing only with respect to 
one another; consequently, anything which troubles or 
perplexes the ascertaining those changes of proportion 
by the means of a general, determinate and invariable 
scale, must be hurtful to trade. . . Money . . . 
is an ideal scale of equal parts. If it be demanded what 
ought to be the standard value of one part? I answer 
by putting another question : What is the standard length 
of a degree, a minute, a second? It has none . . . 
but so soon as one part becomes determined by the nature 
of a scale, all the rest must follow in proportion. Of 
this kind of money ... we have two examples. 
The bank of Amsterdam presents us with the one, the 
coast of Angola with the other." 1 

Steuart speaks here simply of the part money plays 
in circulation as the standard of price and money of 
account. If different commodities are marked in the 
price-list at 15s., 20s., 36s., respectively, then I care, 

1 Steuart, 1. c., v. II., p. 154, 299 [1st London edition, ol 
1767, v. I., p. 526-531. Tranal.]. 


in fact, neither TOT the silver substance, nor for the 
name of the shilling when comparing the magnitudes 
of their valuek The ratios between the numbers 15, 
20, 36, tell everything, and the number 1 has become 
the only unit of measure. Only the abstract proportion 
of numbers can at all serve as a purely abstract expres 
sion of proportion. In order to be consistent, Steuart 
should have dropped not only gold and silver, but their 
legal baptismal names as well. Since he does not un 
derstand the nature of the transformation of the meas 
ure of value into a standard of price, he naturally be 
lieves that the definite quantity of gold which serves 
as a unit of measure relates as a measure not to other 
quantities of gold, but to values as such. Since com 
modities appear as quantities of the same denomina 
tion through the conversion of their exchange values 
into prices, he denies that property of the measure which 
reduces them to one denomination ; and since in this 
comparison of different quantities of gold the quantity 
of gold which serves as a unit of measure is conventional, 
he does not see the necessity of fixing it at all. Instead 
of calling 1-360 part of a circle degree, he might give 
that name to l-180th part; the right angle would then 
be measured by 45 degrees instead of 90, and acute and 
obtuse angles would be measured accordingly. Never 
theless, the measure of the angle would remain, then, 
as before, first a qualitatively definite mathematical fig 
ure, the circle, and second a quantitatively definite part 
of the circle. As for Steuart s economic illustrations, 
he refutes his own argument with one and does not prove 
anything with the other. The bank money of Amster- 


dam was, in fact, merely the reckoning name for Span 
ish doubloons, which retained their full weight by lying 
idly in the bank vaults, while the circulating coins be 
came thinner from hard rubbing against the outer world. 
And as for the African idealists we have to abandon 
them to their fate until critical travelers will tell us 
more about them. 1 The French assignat could be called 
an almost ideal money in Steuart s sense: "National 
property. Assignation of 100 francs" To be sure, the 
use-value which the assignation was supposed to repre 
sent, namely, the confiscated land, was indicated here, 
but the quantitative definition of the unit of measure 
was forgotten and "the franc" became a meaningless 
word. How much or how little land the assignation 
franc represented depended on the results of the public 
auctions. In practice, however, the assignation franc 
circulated as a token of value of silver money and its 
depreciation was, therefore, measured by this silver 

The period of the suspension of cash payments by 
the Bank of England was hardly more fruitful of war- 
bulletins than of money theories. The depreciation of 
bank notes and the rise of the market price of gold 

1 On the occasion of the last commercial crisis the ideal 
African money received loud praise from certain English 
quarters, after its seat was this time moved from the coast 
to the heart of Barbary. The freedom of the Berbers from 
commercial and industrial crises was ascribed to the ideal unit 
of measure of their bars. Would it not have been simpler to 
say that trade and industry are the conditio sine qua non of 
commercial and industrial crises ? 


above its mint price called forth again the doctrine of 
the ideal unit of money on the part of some of the ad 
vocates of the Bank. Lord Castlereagh found the clas 
sical confused expression for the confused idea by speak 
ing of the unit of measure of money as "a sense of value 
in reference to currency as compared with commodi 
ties." When a few years after the peace of Paris con 
ditions permitted the resumption of cash payments, the 
same question which had been stirred up by Lowndes 
under William III., came up, hardly changed in form. 
An enormous government debt, as well as a mass of 
private debts, accumulated in twenty years, fixed obli 
gations, etc., had been contracted on the basis of de 
preciated bank notes. Were they to be paid back in 
bank notes of which 4672, 10s. nominal, actually rep 
resented 100 pounds of 22 carat gold? THOMAS ATT- 
WOOD, a banker of Birmingham, came forth as Lowndes 
redivivus. The creditors were to receive nominally as 
many shillings as had been nominally borrowed, but if 
about 1-78 of an ounce of gold constituted a shilling 
according to the old standard of coinage, then say 1-90 
of an ounce should now be christened a shilling. Att- 
wood s adherents are known as the Birmingham school 
of "little shillingmen." The controversy over the ideal 
money unit, which had started in 1819, still went on in 
1845 between Sir Robert Peel and Attwood, whose own 
wisdom, as far as the function of money as a measure 
is concerned, is exhaustively summed up in the following 
passage, in which, referring to Sir Robert Peel s con 
troversy with the Birmingham Chamber of Commerce, 
he sayp : "The substance of vour queries is ... in 


what sense is the word pound to be used? ... To 
what will the sum one pound be equivalent? . . . 
Before I venture a reply I must enquire what consti 
tutes a standard of value? . . . Is 3 17s. \Q l /t d. 
an ounce of gold, or is it only of the value of an ounce 
of gold? If 3 17s. lO^ad. be an ounce of gold, why 
not call things by their proper names, and, dropping the 
terms pounds, shillings and pence, say ounces, penny 
weights and grains? . . . If we adopt the terms 
ounces, pennyweights and grains of gold, as our mone 
tary system, we should pursue a direct system of bar 
ter. . . . But if gold be estimated as of the value 
of 3 17s. lO^d. per ounce . . . how is this 
. . . that much difficulty has been experienced at 
different periods to check gold from rising to 5 4s. 
per ounce, and we now notice that gold is quoted at 
3 17s. 9d. per ounce? . . . The expression pound 
has reference to value, but not a fixed standard value. 
. . . The term pound is the ideal unit. . . . 
Labour is the parent of cost and gives the relative value 
to gold or iron. Whatever denomination of words are 
used to express the daily or weekly labour of a man, 
such words express the cost of the commodity pro 
duced/ 1 

In the last words the hazy conception of the ideal 
money measure melts away and its real meaning breaks 
through. The reckoning names of gold, pound sterling, 
shilling, etc., should be names for definite quantities 

1 The Currency Question, The Gemini Letters, London, 1844, 
p. 260-272, passim. 


of labor-time. Since labor-time constitutes the sub 
stance and the intrinsic measure of values, these names 
would then actually represent definite proportions of 
value. In other words, labor-time is maintained to be 
the true unit of measure of money. With this we leave 
the Birmingham school, but should add in passing that 
the doctrine of the ideal measure of money acquired 
new importance in the controversy over the question 
of the convertibility or non-convertibility of bank notes. 
If paper receives its name from gold or silver, then the 
convertibility of a note or its exchangeability for gold 
or silver remains an economic law, no matter what the 
civil law may be. Thus a Prussian paper thaler, al 
though legally inconvertible, would immediately depre 
ciate if it were worth less than a silver thaler in ordi 
nary trade, i. e., if it were not practically convertible. 
The consistent advocates of inconvertible paper money 
in England, therefore, sought refuge in the ideal meas 
ure of money. If the reckoning names of money, , 
s., etc., are names of certain quantities of atoms of value, 
of which a commodity absorbs or loses now more, now 
less in exchange for other commodities, then an English 
5 note, e. g., is just as independent of its relation to 
gold as of that to iron and cotton. Since its title would 
no more imply its theoretical equality with a certain 
quantity of gold or any other commodity, the demand 
for its convertibility, i. e., for its practical equality with 
a definite quantity of a specified thing would be excluded 
by the very conception of the note. 

The theory of labor-time as the direct measure of 
money was first systematically developed by JOHN 


GRAY. 1 He makes a National Central Bank ascertain 
through its branches the labor-time consumed in the pro 
duction of various commodities. The producer receives an 
official certificate of value in exchange for his commodity, 
i. e., he gets a receipt for as much labor-time as his com 
modity contains, 2 and these bank notes of one week s 
labor, one day s labor, one hour s labor, etc., serve at the 
same time as a check for an equivalent in all other 
commodities stored in the bank warehouses. 3 This is 
the fundamental principle carefully worked out in de 
tail and based throughout on existing English institu- 

1 John Gray : "The Social System. A Treatise on the Principle 
of Exchange, Edinburgh, 1831." Compare with "Lectures on 
the Nature and Use of Money, Edinburgh, 1848," by the same 
author. After the February revolution Gray sent a memorial 
to the provisional French government, in which h instructs 
the latter that France is not in need of an "organization of 
labour," but of an "organization of exchange" of which the 
plan is fully worked out in his money system. Honest John 
did not suspect that sixteen years after the appearance of 
his "Social System" a patent for the same discovery would be 
taken out by the ingenious Proudhon. 

1 Gray, "The Social System," etc., p. 63 : "Money should be 
merely a receipt, an evidence that the holder of it has either 
contributed certain value to the national stock of wealth or 
that he has acquired a right to the same value from some one 
who has contributed to it." 

1 An estimated value being previously put upon produce, 
let it be lodged in a bank, and drawn out again, whenever it 
is required, merely stipulating, by common consent, that ha 
who lodges any kind of property in the proposed National 
Bank, may take out of it an equal value of whatever it may 
contain, instead of being obliged to draw out the self-same 
thing that he put in." L. c., p. 68. 


tions. Under this system, says Gray, "to sell for money 
may be rendered, at all times, precisely as easy as it now 
is to buy with money; . . . production would be 
come the uniform and never-failing cause of demand." 1 
The precious metals would lose their "privilege" as 
ugainst other commodities and "take their proper place 
in the market beside butter and eggs, and cloth and 
calico, and then the value of the precious metals will 
concern us just as little ... as the value of the 
diamond." 1 "Shall we retain our lictitious standard of 
value, gold, and thus keep the productive resources of 
the country in bondage? or, shall we resort to the nat 
ural standard of value, labour, and thereby set our pro 
ductive resources free? " 

Labor-time being the intrinsic measure of value, why 
should there be another external measure side by side 
with it? Why does exchange value develop into price? 
Why do all commodities estimate their value in one ex 
clusive commodity, which is thus converted into a spe 
cial embodiment of exchange value into money? That 
was the problem which Gray had to solve. Instead of 
solving it, he imagined that commodities could be re 
lated directly to each other as products of social labor. 
But they can relate to each other only in their capacity 
of commodities. Commodities are the direct products 
of isolated independent private labors, which have to 
be realized as universal social labor through their alien 
ation in the process of private exchange, that is to say, 

*L. c., p. 16. 

Gray: "Lectures on Money, etc.," p. 182. 

L. e.. p. 169. 


labor based on the production of commodities becomes 
social labor only through universal alienation of indi 
vidual labors. But by assuming that the labor-time con 
tained in commodities is directly social labor-time, Gray 
assumes it to be common labor-time or labor-time of di 
rectly associated individuals. Under such conditions a 
specific commodity like gold or silver could not con 
front other commodities as the incarnation of universal 
labor, and exchange value would not be turned into 
^rice; but, on the other hand, use-value would not be 
come exchange value, products would not become com 
modities and thus the very foundation of the capital 
istic system of production would be removed. But that 
is not what Gray has in mind. Products are to be pro 
duced as commodities, but are not to be exchanged as 
commodities. He entrusts a national bank with the 
carrying out of this pious wish. On the one hand, 
society, through the bank, makes individuals indepen 
dent of the conditions of private exchange, and on the 
other, it allows them to go on producing on the basis 
of private exchange. The logic of things, however, 
compels Gray to do away with one condition of capi 
talistic production after another, although he wishes 
to "reform" only the money system which results from 
the exchange of commodities. Thus he transforms cap 
ital into national capital, 1 land into national property, 1 

1 "The business of every country ought to be conducted on a 
national capital." John Gray, "The Social System," etc., 
p. 171. 

1 "The land to be transformed into national property." L. c.. 
p. 298. 


and if his bank is to be watched closely, it will be found 
that it not only receives commodities with one hand and 
issues certificates for work delivered with the other, but 
that it regulates production as well. In his last work, 
"Lectures on Money," in which Gray is anxious to dem 
onstrate that his labor-money is a purely bourgeois re 
form, he gets tangled up in even more glaring contra 

Every commodity is directly money. That was Gray s 
theory deducted from his incomplete and, therefore, 
false analysis of commodities. The "organic" structure 
of "labor money," the "national bank" and the "ware- 
docks" are mere fantastic visions in which the dogma 
is made by a legerdemain to appear to us as a universal 
law. The dogma that a commodity is money or that 
the isolated labor of the individual contained in it 
is direct social labor, will of course not become true 
through the mere fact that a bank believes in it and 
carries on operations accordingly. It is more likely that 
bankruptcy would play in that case the part of the prac 
tical critic. What remains concealed in Gray s writings 
and hidden from himself as well, namely, that labor- 
money is a well-sounding economic phrase for the pious 
wish to get rid of money, and with money, of exchange 
value, and with exchange value, of commodities, and 
with commodities, of the capitalistic mode of produc 
tion, was clearly expressed by some English socialists 
of whom a few preceded and others followed Gray. 1 

1 See e. g. W. Thompson : "An Inquiry into the Distribution 
of Wealth, etc.," London, 1827. Bray, "Labour s Wrongs and 
Labour s Remedv." Leeds, 1839. 

- 107 

But it remained for Mr. Proudhon and his school to 
preach in all earnest the degradation of money and the 
exaltation of the commodity as the gist of socialism and 
thus to reduce socialism to an elementary misconcep 
tion of the necessary connection between commodity 
and money. 1 


After the commodity has received in the process of 
price determination the form in which it becomes capa 
ble of circulation, and after gold has acquired the charac 
ter of money in the same process, circulation will both 
present and solve the contradictions which are inherent 
in the process of exchange of commodities. The actual 
exchange of commodities, i. e., the social interchange of 
matter consists of a change of form in which is unfolded 
the double character of the commodity as use-value and 
exchange value, and at the same time its own change of 
form is crystallized in distinct forms of money. To de 
scribe this change of form is to describe circulation. As 
we have seen, given a world of commodities and with it 
a system of division of labor, commodity is but a devel 
oped form of exchange value ; in the same manner, cir 
culation implies a steady stream of exchange transac 
tions which are being continually renewed on all sides. 
The second assumption we make is that commodities 

1 Alfred Darimont s "De la Refonne dea banques/ Paris, 
1856, may be considered as a compendium of this melodramatic 
theory of money. 


enter the process of exchange with a definite price or 
that they appear to each other in that process in a 
double capacity, really as use-values, ideally in price 
as exchange values. 

The liveliest streets of London are crowded with 
stores whoe show windows are filled with the riches 
of the world, Indian shawls, American revolvers, Chi 
nese porcelain, Parisian corsets, Russian furs and trop 
ical spices, but all of these things of joy bear fatal 
white labels marked with Arabian figures with the la 
conic characters , s., d. Such is the picture of the 
commodity appearing in circulation. 


On close examination the process of circulation is 
seen to consist of two distinct cycles. If we denote 
commodity by the letter C and money by the letter M 
we can express these two forms as follows: 
C M C 
M C M. 

In this chapter we are interested exclusively in the 
first form, i. e., in the form which serves as the direct 
expression of the circulation of commodities. 

The process C M C consists of the movement 
C M, the exchange of the commodity for money, or 
selling; the opposite movement M C, exchange of 
money for a commodity, or bui/iny ; and of the unity of 
the two movements C M C, exchange of the com 
modity for money in order to exchange the money for 
a commodity, or selling in order to buy. But the result 
which marks the end of the process is C C, exchange 


of commodity for commodity, real interchange of mat 

If we look at it from the extreme end of the first 
commodity, C M C represents its transformation into 
gold and its retransformation from gold into a com 
modity; a movement in which the commodity exists 
first as a particular use-value, then divests itself of that 
character, acquires the character of exchange value or 
universal equivalent, in which capacity it has nothing 
in common with its natural form, then throws off the 
last form as well to remain finally an actual use-value 
for the satisfaction of particular wants. In this last 
form it falls out of the sphere of circulation into that 
of consumption. The entire process of circulation 
C M C thus includes the combined series of meta 
morphoses, which every single commodity undergoes 
in order to become a direct use-value to its possessor. 
The first metamorphosis is accomplished in the first 
phase of the circulation process, C M; the second in 
the last phase, M C; and the entire process consti 
tutes the curriculum vitae of the commodity. But the 
process C M C represents the combined metamor 
phosis of a single commodity and constitutes at the 
same time the sum of certain one-sided metamorphoses 
of other commodities, since every metamorphosis of 
the first commodity constitutes its transformation into 
another commodity and therefore the transformation of 
the other commodity into it ; hence it constitutes a two 
fold transformation which takes place at the same 
stage of circulation. We must then consider separately 


each of the two processes of exchange into which cir 
culation C M C breaks up. 

C M or sale : commodity C enters the process of cir 
culation not only as a particular use-value, e. g., a ton 
of iron, but as a use-value of a certain price, say, 3 
17s. 10^ d., or an ounce of gold. While this price is on 
the one hand the exponent of the quantity of labor-time 
contained in a ton of iron, i. e., of the magnitude of its 
value, it at the same time expresses the pious wish of 
the iron to become gold, i. e., to give to the labor-time 
it contains the aspect of universal social labor-time. 
Unless this trans-substantiation takes place, the ton of 
iron not only ceases to be a commodity, but even a prod 
uct, for it is a commodity only because it is a non-use- 
value to its owner; that is to say, his labor counts as 
actual labor only in so far as it is labor useful to others, 
and the thing is useful to him only as abstract universal 
labor. It is, therefore, the business of iron, or of its 
owner, to find that point in the world of commodities 
where iron attracts gold. But this difficulty, the salto 
mortale of the commodity, is overcome when the sale 
actuall} takes place, as is assumed here on the analysis 
of simple circulation. When the ton of iron is realized 
as a use-value through its alienation, i. e., by passing 
from the hands in which it is a non-use-value to hands 
in which it is a use-value, it at the same time realizes 
its price and from mere imaginary gold it becomes real 
gold. In place of the name one ounce of gold or 3 17s. 
lO^d., an ounce of real gold has appeared, but the ton 
of iron has cleared that place. Not only does the com 
modity which in its price had been ideally converted 


into gold actually turn into gold through the sale 
C M, but gold, which as a measure of value had been 
only ideal money and in fact figured merely as a money 
name of commodities is now turned into actual 
money 1 by the same process. Just as gold be 
came the ideal universal equivalent, because all com 
modities measured their values by it, so does it 
now become the absolutely alienable commodity, real 
money, because it is the product of the universal 
alienation of commodities for it and the sale C M 
js the process by means of which that universal aliena 
tion takes place. But gold becomes real money only 
through sale, because the exchange values of commod 
ities were already ideal gold in their prices. 

In the sale C M, as well as in the purchase M C, 
two commodities, entities of exchange value and use- 
value, confront each other, but the exchange value of 
the commodity exists only ideally as price; while as re 
gards gold, although it is really a use-value, its use- 

1 "Di due sorte e la moneta, ideale e reale ; e a dui diversi 
usi e adoperata, a valutare le cose e a comperarle. Per valutare 
ft buona la moneta ideale, cosi come la reale e forse anche pin. 
L altro uso della moneta e di comperare quelle cose istease, 
ch ella apprezza . . . i prezzi e i contratti si valutano in 
moneta ideale e si eseguiscono in moneta reale." Galiani, 
1. c., p. 112 sq. ("Money is of two kinds, ideal and real; and 
is adapted to two different uses: to determine the value of 
things and to buy them. For the purpose of valuation ideal 
money is as good as real and perhaps even better. The other 
use of money is to buy the same things which it appraises 
. . . prices and contracts are determined in ideal money 
and are executed in real money.") 

value is confined only to its being the bearer of ex 
change value and is, therefore, merely a formal use- 
value,, having no relation to a real individual want. The 
antithesis of use-value and exchange value is thus dis 
tributed at the two extreme poles of C M, so that the 
commodity confronts gold as a use-value which has yet 
to realize in gold its exchange value or its price, while 
gold confronts the commodity as an exchange value, 
whose formal use-value is yet to be realized in the com 
modity. Only through this duplication of the com 
modity as commodity and gold, and, further, through 
the twofold and polar relation by virtue of which each 
extreme represents but ideally what its opposite is in 
reality and is in reality what its opposite is only ideal 
ly in short, only through the appearance of commod 
ities a? two-sided polar opposites are the contradictions 
solved that are inherent in the process of exchange. 

So far we have considered C M as sale, as the con 
version of commodity into money. But if we look at it 
from the other end, the same process will assume the 
form M C, or purchase, i. e., the conversion of money 
into commodity. Sale is necessarily its opposite at the 
same time; it is the former if we look at the process 
from one end, and the latter if we regard the process 
from the other end. Tn practice this process differs 
only in that the initiative in C M originates at the 
commodity end or with the seller, while in M C it 
comes from the money end or the buyer. In describing 
the first metamorphosis of tlie commodity, its conver 
sion into money as a result of the completion of the 
first phase of circulation C M, we assume at the same 


time that another commodity has been converted into 
money and is now in its second phase of circulation, 
M C. Thus we get into a vicious circle of assumptions. 
Circulation itself constitutes such a vicious circle. If 
we did not consider M in M C as the result of a meta~ 
inorphosis of another commodity, we would thereby 
take exchange out of the process of circulation. But 
outside of the latter the form C M disappears and only 
two different Cs confront each other, say iron and gold, 
the exchange of which does not constitute a part of the 
process of circulation, being direct barter. Gold, at 
the source of its production, is a commodity like any 
other commodity. Its relative value and that of iron 
or of any other commodity is expressed here in quantities 
in which they are mutually exchanged. But in the 
process of circulation this operation is implied, the 
value of gold being already given in the prices of com 
modities. Nothing can, therefore, be more erroneous 
than the idea that gold and commodity enter into the 
relation of direct barter within the process of circula 
tion and that their relative values are ascertained 
through their exchange as simple commodities. The 
illusion that gold is bartered as a simple commodity 
for other commodities in the process of circulation is 
due to the fact that prices represent equations in which 
certain quantities of commodities are made equal to 
certain quantities of gold, i. e., that the commodities are 
made to relate to gold in its capacity of money, as a 
universal equivalent, and, therefore, appear to be di 
rectly exchangeable for it. In so far as the price of a 
commodity is realized in gold, it is exchanged for 


gold as a commodity, as a particular embodiment of 
labor-time; but in so far as it is the price that is re 
alized in gold, the commodity is exchanged for gold in 
its capacity of money and not of a commodity, i. e., it is 
exchanged for gold as a universal embodiment of labor- 
time. But in either case the quantity of gold for which 
the commodity is exchanged in the process of circula 
tion is not determined by exchange, but the exchange 
is determined by the price of the commodity, i. e., by 
its exchange value estimated in gold. 1 

Within the process of circulation gold appears in 
everybody s hands as the result of sale C M. But since 
C M, sale, is at the same time M C, purchase, it is 
apparent that while C, the commodity from which the 
process starts, is pasing through its first metamorphosis, 
another commodity, which confronts it as the opposite 
pole M, is completing its second metamorphosis and is, 
therefore, passing through the second phase of circula 
tion, while the first commodity is still in the first phase 
of its course. 

As a result of the first phase of circulation, the sale, 
we get money which is the starting point of the second 
phase. In place of the commodity in its first form ap 
pears its golden equivalent. This result may now form 
a resting point, since the commodity in this second form 

1 This, of course, does not prevent the market price of com 
modities to be above or below their value. However, this con 
sideration is foreign to simple circulation and belongs to quite 
another sphere to be considered later, when we shall investi 
gate the relation between value and market price. 


possesses a lasting existence of its own. The commod 
ity, a non-use-value in the hands of its possessor, is now 
on hand in an always useful, since always exchangeable, 
form, and it depends upon circumstances when and at 
what point of the surface of the commodity world it 
will again enter circulation. Its formation into a gold 
chrysalis constitutes an independent period in its life 
which may last a greater or less length of time. While 
in the case of barter the exchange of one particular use- 
value is directly bound up with the exchange of another 
particular use-value, the universal character of labor 
which creates exchange value is manifested in the sep 
aration and lack of coincidence of acts of purchase and 

M C, purchase, is the inverted movement of C M 
and at the same time the second or final metamorphosis 
of the commodity. As gold, i. e., in the form of the uni 
versal equivalent, the commodity can be directly repre 
sented in the use-values of all other commodities; the 
latter aspire to gold as their hereafter, but at the same 
time indicate in their prices the key in which it must 
sound in order that their bodies, their use-values, may 
take the place of money, while their souls, their ex 
change-values, may enter gold. The universal product 
of the alienation of commodities is the absolutely alien 
able commodity. There is no qualitative and only a 
quantitative limit to the transformation of gold into 
commodity, namely, the limit of its own quantity or 
magnitude of its value. "Everything is to be had for 
cash." While in the movement C M, the commodity,, 
through its alienation as a use-value, realizes its own 


price and the use-value of somebody else s money; it 
realizes in the movement M C, through its alienation 
as an exchange value, its own use-value and the price 
of the other commodity. While through the realization 
of its price the commodity transforms gold into actual 
money, it turns gold into its inerely fleeting money- 
form, through its own retransformation. Since the 
circulation of commodities implies an extensive division 
of labor and consequently a diversity of wants on the 
part of individuals, a diversity which bears an inverse 
ratio to the specialization of their own products, the 
purchase M C may appear as an equation with one com 
modity equivalent or split up into a series of commodity- 
equivalents limited by the variety of the demands of the 
purchaser and by the amount of money in his possession. 
Just as a sale is a purchase, so is a purchase a sale. M C 
is at the same time C M, but the initiative belongs in 
this case to gold or the purchaser. 

Coming back now to C M C, or to circulation as 
a whole, it is apparent that it contains the combined 
series of metamorphoses through which a commodity 
passes. But at the same time as one commodity enters 
the first phase of its circulation and completes its first 
metamorphosis, another commodity enters the second 
phase of circulation, complete? its second metamorphosis 
and falls out of circulation; the first commodity enters 
at the same time the second phase of circulation com 
pletes its second metamorphosis and falls out of circu 
lation, while a third commodity enters circulation, 
passes through the first phase of its course completing 
the first metamorphosis. 


Thus, the combined circulation C M C, as a com 
plete metamorphosis of a commodity always constitutes 
at the same time the end of the complete metamor 
phosis of another commodity and the beginning of a 
complete metamorphosis of a third commodity, i. e., a 
series without beginning or end. To illustrate this let 
UP call C in either extreme C and C" respectively, in 
order to distinguish the commodities, the series reading 
thus: C M C". The first member, C M, presup 
poses in fact that M is the result of another transac 
tion C M, and is thus itself merely the last member 
of a series C M C , while the second part M C" is 
merely a result of C" M, or appears as the first part 
of C" M C ", and so on. Furthermore, although M is 
the result of only one sale, it appears that the last part 
M C, may be represented as M C -\- M C" -j- 
M C ", etc., i. e., it may be split up into a number of 
purchases, and consequently a number of sales, or into 
a number of first members of new complete metamor 
phoses of commodities. Since the complete metamor 
phosis of a single commodity thus appears as a link not 
only of one endless chain of metamorphoses, but of 
many such chains, the process of circulation in the world 
of commodities presents a hopeless confusion of inter 
twined movements constantly ending and starting anew 
at a countless number of points. But every single sale 
or purchase stands as an independent isolated act, whose 
supplemental act may be separated from it in time and 
place, and therefore does not need to follow it directly 
as its continuation. Every separate process of circula 
tion, C M or M 0, as a transformation of one com- 


modity into use-value and of another into money, i. e., 
as the first and second phases of circulation respective 
ly forms an independent halting point from either di 
rection; but, on the other hand, all commodities com 
mence their second metamorphosis in the common form 
of the universal equivalent, gold, and stop at the start 
ing point of the second phase of circulation; for that 
reason any M C dovetails in actual circulation with 
any C M; the second chapter in the life-course of 
one commodity with the first chapter of that of another 
commodity. A, e. g., sells 2 worth of iron. He thus 
completes the transaction C M or the first metamor 
phosis of commodity iron, but postpones his purchase 
until some other time. At the same time B, who sold 
2 quarters of wheat for G a fortnight since, buys with 
the same G a coat and trousers of Moses & Son, thus 
completing M C or the second metamorphosis of the 
commodity, wheat. 

The two transactions M C and C M appear here 
merely as links of one chain, because a commodity ex 
pressed in gold looks like any other commodity, and 
one cannot tell by the looks of the gold whether it is 
transformed iron or transformed wheat. C M C ap 
pears, therefore, in the actual process of circulation a* 
a jumble of countless accidentally coinciding or suc 
cessively following members of different complete meta 
morphoses. The actual process of circulation thus ap 
pears not as a complete metamorphosis of a commodity, 
not as its movement through opposite phases, but as a 
mere agglomeration of many accidentally coinciding or 
successive purchases and sales. The process thus loses 


all clearness of outline which is so much more the case 
since every single act of circulation, e. g., sale, is at the 
same time its opposite, purchase, and vice versa. On the 
other hand, the process of circulation is nothing but 
the movement of metamorphoses in the world of com 
modities and, therefore, must reflect them also in its 
movement as a whole. How that reflection takes place 
we shall consider in the following chapter. It may be 
added here that in C M C the two extreme Cs con 
stitute two forms of commodities which do not bear the 
same relation to M. The first C relates to money as a 
commodity of a special class to a universal commodity, 
while money relates to the second C as a universal com 
modity to an individual commodity. C M C can, 
therefore, be reduced by abstract logic to the final form 
S TJ I in which S, standing for species, forms the 
first extreme; U, signifying universality, forms the 
connecting medium, and I, individuality, constitutes 
the last extreme. 

The owners of commodities entered the sphere of 
circulation simply as guardians of commodities. Within 
that sphere they confront each other in the opposite 
roles of buyer and seller, one as a personified sugar-loaf, 
the other as personified gold. As soon as the sugar- 
loaf is turned into gold, the seller becomes a buyer. 
These definite social functions are no outgrowths of 
human nature, but are the products of relations of ex 
change between men who produce their goods in the 
form of commodities. They are so far from being pure 
ly individual relations between buyer and seller that 
both enter this relation only to the extent that their 


individual labor is disregarded and is turned into money 
as labor of no individual. Just as it is, therefore, child 
ish to consider these economic bourgeois roles of buyer 
and seller as eternal social forms of human individu 
ality, so it is on the other hand, preposterous to lament 
in them the extinction of individuality. 1 They are the 
necessary manifestations of individuality at a certain 
stage of the social system of production. Moreover, in 
the opposition of buyer and seller the antagonistic nature 

1 How deeply some beautiful souls are wounded by tbe merely 
superficial aspect of the antagonism which asserts itself in buy 
ing and selling, may be seen from the following abstract from 
M. Isaac Pereire s: "Legons sur Pindustrie et les finances," 
Paris, 1832. The fact that the same Isaac in his capacity of 
inventor and dictator of the "Credit mobilier" has acquired the 
reputation of the wolf of the Paris Bourse shows what lurks 
behind the sentimental criticism of economics. Says Mr. Pereire 
at the time an apostle of St. Simons: "C est parceque tous le-> 
individus sont isole"s, se"par6s les uns des autres, soit dana leur 
travaux, soit pour la consommation, qu il y a echange entre 
eux des produits de leur Industrie respective. De la necessity 
de l change est derived la necessity de determiner la valeur 
relative des objets. Les ide>s de la valeur et de I &hange 
sont done intimement liees, et toutes deux dans leur forme 
actuelle exprime l individualisme et 1 antagonisme ... II 
n y a lieu a fixer la valeur des produits que parcequ il y a 
vente at achat, en d autres termes. anhigonisme entre les divers 
membres de la societe". II n y a lieu ft s occuper du prix, de 
valeur que la ofi il y avait vente et echat, c est A dire, ofi chaque 
individu gtait oblige de hitter, pour so procurer les object 
nfcessairea a 1 entretien de son existence" (1. c., p. 2, 3 pas 
sim). ("Since individuals aro isolated and separated from 
one another both in their labors and in consumption, exchange 
takes place between them in the products of their respective 


of capitalistic production is expressed as yet so super 
ficially and as mere matter of form, that this opposition 
belongs also to precapitalistic forms of society, since it 
merely requires that the mutual relations of individuals 
should be those of owners of commodities. 

Now, if we consider the result of C M C, it comes 
down to mere interchange of matter, C C. A com 
modity has been exchanged for a commodity, a use- 
value for a use-value, and the transformation of the 
commodity into money, or the commodity in its form of 
money, serves merely as a means of effecting this inter 
change of matter. Money thus appears merely as a 
medium of exchange of commodities; not as a medium 
of exchange in general, but as a means of exchange in 
the sphere of circulation, i. e., a medium of circulation. 1 

industries. From the necessity of exchange arises the necessity 
of determining the relative value of things. The ideas of 
value and exchange are thus intimately connected and both 
express in their actual form individualism and antagonism. 
. . . The determination of values of products takes place 
only because there are sales and purchases, or, to put it differ 
ently, because there is an antagonism between different mem 
bers of society. One has to occupy himself with price and 
value only where there is sale and purchase, that is to say, 
where every individual is obliged to struggle to procure for 
himself the objects necessary for the maintenance of his ex 

1 "L argent n est que le moyen et Pacheminement, au lieu que 
les denrees utiles a la vie sont la fin et le but." ("Money is 
but the ways and means, while the things useful in life are 
the end and object.") Boisguillebert : "Le Detail de la France," 
1697, in Eugene Daires "Eeonomistes financiers du XVIII 
ieme siecle, vol. I., Paris, 1843. p. 210. 

We have seen that the process of circulation of com 
modities comes to a completion in C C, appearing as 
mere barter carried on by means of money; further, 
that C M C represents in general not only two iso 
lated processes, but their dynamic union as well ; but 
to draw from that the conclusion that purchase and sale 
form an indivisible unit, is a mode of thinking the crit 
icism of which belongs to the domain of logic, and not 
to that of economics. The separation of purchase and 
sale in the process of exchange destroys all local, prim 
itive, patriarchal and naively genial barriers to inter 
change of matter in society. It is, moreover, the gen 
eral form of the separation of the points of coincidence 
and opposition in this interchange, carrying within it 
the possibility of commercial crises, because the antag 
onism of commodity and money is the abstract and 
general form of all antagonisms with which the capi 
talistic system of labor is pregnant. Hence, circulation 
of money is possible without crises, but crises can not 
occur without money circulation. In other words, where 
labor based on the system of private exchange has not 
reached the stage marked by the existence of money, 
it is less capable of producing those phenomena which 
presuppose the full development of the capitalistic 
mode of production. Bearing this in mind we can 
appreciate the depth of the criticism which proposes to 
do away with the "shortcomings" of capitalistic pro 
duction by abolishing the "privilege" enjoyed by the 
precious metals and introducing a so-called "rational 
monetary system." As a sample of economic defence 
of an opposite character may serve the following pir.ce 


of reasoning which has been proclaimed exceedingly 
keen. JAMES MILL, the father of the well-known 
English economist, John Stuart Mill, says: "Whatever 
. . . be the amount of the annual produce, it never 
can exceed the amount of the annual demand . . . 
Of two men who perform an exchange, the one does 
not come with only a supply, the other with only a de 
mand; each of them comes with both a demand and a 
supply. . . . The supply which he brings is the 
instrument of his demand ; and his demand and supply 
are of course exactly equal to one another. It is there 
fore, impossible that there should ever be in any coun 
try a commodity or commodities in quantity greater 
than the demand, without there being, to an equal 
amount, some other commodity or commodities in quan 
tity less than the demand." 1 

1 In November, 1807, William Spence published a pamphlet 
in England under the title: "Britain Independent of Com 
merce." The principle set forth in this pamphlet was further 
elaborated by William Gobbet in his "Political Register" under 
the virulent title, "Perish Commerce." To this James Mill re 
plied in 1808 in his "Defence of Commerce" which contains the 
passage quoted above from his "Elements of Political Econ 
omy" (p. 190-193, Transl.). In his controversy with Sismondi 
and Malthus on commercial crises, J. B. Say appropriated this 
clever device, and as it would be difficult to point out with 
what new idea this comical "prince de la science" had enriched 
political economy, his continental admirers have trumpeted him 
as the man who had unearthed the treasure of the metaphysical 
balance of purchases and sales; as a matter of fact, his merits 
consisted rather of the impartiality with which he equally mis 
understood his contemporaries, Malthus, Sismondi and Ricardo. 


Mill restores the balance by turning the process of 
circulation into direct barter and then smuggling into 
direct barter the character of buyer and seller borrowed 
by him from the process of circulation. To put it in 
his own confused language, during certain periods when 
all commodities are unsaleable there are really more 
buyers than sellers of one commodity, money, and more 
sellers than buyers of all other money, commodities; 
such was, e. g., the case at certain moments during the 
commercial crisis of 1857-58 in London and Hamburg. 
The metaphysical balance of purchases and sales amounts 
to this, that every purchase is a sale and every sale is a 
purchase, which is a poor consolation to the guardian of 
the commodity who can not bring about its sale and 
therefore can not buy. 1 

The separation of sale and purchase makes possible 

1 The manner in which economists explain the different aspects 
of the commodity may be seen from the following examples: 

"With money in possession, we have but one exchange to 
make in order to secure the object of desire, while with other 
surplus products we have two, the first of which ( procuring the 
money) is infinitely more difficult than the second." (G. Opdyke, 
"A Treatise on Political Economy," New York, 1851, p. 277-278.) 

"The superior saleableness of money is the exact effect or 
natural consequence of the less saleableness of commodities." 
(Th. Corbet, "An Inquiry into the Causes and Modes of the 
Wealth of Individuals." etc.. London, 1841, p. 117.) 

"Money has the quality of being always exchangeable for 
what it measures." (Bosanquot, "Metallic, Paper and Credit 
Currency," etc., London, 1842. p. 100.) 

"Money can always buy other commodities, whereas other 
commodities can not always buy money." (Th. Tooke, "An In 
quiry into the Currency Principle," 2d ed.. London, 1844, p. 10.) 

a large number of fictitious transactions side by side 
with genuine trade before the final exchange between 
the producer and the consumer of commodities takes 
place. It enables a host of parasites to penetrate the 
process of production and exploit the separation. But 
this, again, means that with money as the universal 
form of labor under the capitalist system, there is the 
possibility of the development of its contradictions. 


Actual circulation appears at first sight as a mass 
of purchases and sales accidentally taking place side by 
side. In buying as in selling, commodities and money 
always stand in the same mutual relation : the seller, on 
the side of the commodity ; the buyer, on that of money. 
Money as a medium of circulation always appears there 
fore as a means of purchase; and in that way the 
difference in its destinations in the opposite phases of 
the metamorphosis of the commodity becomes indis 

Money passes into the hands of the seller in the 
same transaction in which the commodity passes into 
the hands of the buyer. Commodities and money 
thus flow in opposite directions and this change 
of place in which the commodity passes over to one 
side and money to the other side, occurs simultaneously 
at an indefinitely large number of points on the 
entire surface of bourgeois society. But the first 
step which the commodity makes in the sphere of 


circulation is also its last step. 1 Whether it leaves it? 
place on account of its attraction for gold (C M), or 
on account of its attraction by gold (M C), with one 
move, with one change of place it falls out of the sphere 
of circulation into that of consumption. Circulation is 
a continuous flow of commodities, but different com 
modities all the time, since each commodity makes hut 
one move. Every commodity enters upon the second 
phase of its circulation not as the same commodity, but 
as another commodity, gold. Hence the movement of a 
metamorphosed commodity is the movement of gold. 
The same piece of gold or the identical gold coin which 
changed places with one commodity in the act C M, 
reappears from the opposite end as the starting point 
for M C and thus changes places for the second time 
with another commodity. Just as it passed from the 
hands of buyer B into those of seller A, it now leaves 
A s hands who has become a buyer and passes into C s 
hands. The path described by a commodity in its trans 
formation into money and its retransformation from 
money, i. e., the movement of a complete metamor 
phosis of a commodity assumes the aspect of an apparent 
movement of the same coin that changes places twice 
with two different commodities. No matter in how 
scattered and haphazard fashion purchases and sales may 
take place near each other, there is always in actual 

1 The same commodity can be bought and resold many times. 
It circulates, then, not merely aa a commodity, but in a capacity 
which does not exist from the point of view of simple circula 
tion, of the simple contrast of commodity and money. 


circulation a seller for each buyer and the money which 
moves into the place of the commodity sold, before it 
came into the hands of the buyer, must have already 
changed places with another commodity. Sooner or 
later it again leaves the hands of the seller, who turns 
buyer, to pass into the hands of a new seller and this 
frequently repeated change of place forms the interlac 
ing of the metamorphoses of commodities. The same 
coins are moving, some more, others less frequently, from 
one place in the sphere of circulation to another, always 
in the direction opposite to that of the commodities 
moved, thus describing a longer or shorter circulation- 
curve. The different movements of the same coin can fol 
low each other in point of time only, and on the contrary, 
the many scattered purchases and sales which appear 
as so many separate changes of place between commod 
ities and money, occur simultaneously separated only in 
point of space. 

The circulation of commodities C M C in its ele 
mentary form is completely described in the transition 
of money from the hands of the buyer into those of the 
seller and from the hands of the latter, as soon as he 
has turned buyer, into those of a new seller. This com 
pletes the metamorphosis of the commodity and with it 
the movement of money in so far as that movement is 
the expression of the metamorphosis. But since new 
use-values are continually produced in the shape of new 
commodities and must thus be constantly thrown anew 
into circulation, the process C M C is repeatedly re 
newed by the same commodity owners. The money which 
they have spent as buyers gets back into their hands 


as soon as they appear again as vendors of commodities. 
The constant renewal of the circulation of commodities 
finds its reflection in the continual circulation over the 
entire surface of bourgeois society of a quantity of money 
which, passing from hand to hand, describes at the same 
time a number of different small cycles starting from 
numberless points and returning each to its own start 
ing point, to repeat the same movement over again. 

The change of form on the part of commodities ap 
pears as a mere change of place on the part of money 
and the continuity of the circulation movement is all 
on the side of money, since the commodity always makes 
but one step in the direction opposite to money, while 
the latter makes in each case the second step for the 
commodity; the entire movement seems, therefore, to 
proceed from money, although in the case of a sale the 
commodity draws money out of its place, i. e., it circu 
lates money as much as it is circulated by the latter in 
the case of a purchase. Furthermore, owing to the fact 
that money always confronts commodities in its capac 
ity of a means of purchase, and in that capacity moves 
commodities only by realizing their price, the entire 
movement of circulation appears as a change of place 
between money and commodities, the former realiz 
ing the prices of the latter either by separate acts of 
circulation taking place simultaneously and side by 
side, or by successive transactions when the same coin 
realizes the prices of different commodities one after 
another. If we consider, e. g., the series C M C 
M C" M C ", etc., without regard to the qualitative 
aspects which become indistinguishable in the process 

1 9Q 


of circulation, we witness the same monotonous opera 
tion. After realizing the price of C, M successively re 
alizes those of C , C", etc., and commodities C , C", 
", etc., constantly take the place which money has left. 
Money thus appears to keep commodities in circulation 
by realizing their prices. In discharging this function 
of realization of prices, money is itself constantly cir 
culating, now changing its place, now describing a curve 
of circulation, now completing a small circuit where the 
starting and returning points coincide. As a medium of 
circulation, money is subject to a circulation of its own. 
The change of form of the circulating commodities ap 
pears, therefore, as a movement of money which furthers 
the exchange of commodities, motionless in themselves. 
The movement of the circulation process of commodities 
thus takes on the form of the movement of gold as a 
medium of circulation, i. e. of the circulation of money. 
Since owners of commodities give the products of their 
individual labor the appearance of products of social 
labor by turning one object, viz. gold, into the direct 
expression of universal labor-time and therefore into 
money, their own movement by which all of them effect 
the interchange of the material products of their labor 
now appears to them as the direct movement of that 
one object, as the circulation of gold. The social move 
ment itself appears to the owners of commodities partly 
as an outward necessity and partly as a mere formal in 
termediary process which enables every individual who 
puts any use-value into circulation to get other use- 
values out of it of an equal value. The use-value of 
commodities comes into play with their disappearance 

- 130 

from the sphere or circulation, while the use-value of 
money as a medium of circulation is in its very circula 
tion. The movement of a commodity in the sphere 01 
circulation is of a transitory kind, while ceaseless mo 
tion in that sphere constitutes the function of money. 
Through this special function which it performs within 
the sphere of circulation money acquires a new capacity, 
which we have to consider now more closely. 

In the first place, we see that the circulation of money 
forms an endlessly split up movement, since it reflects 
the splitting up of the process of circulation into an in 
finitely large number of purchases and sales and the in 
dependent separation of the mutually supplementary 
phases of metamorphoses of commodities. In the smnll 
cycles described by money, where the starting and re 
turning points coincide, we do find a return movement, 
i. e., an actual circular movement, but the fact that there 
are as many starting points as there are commodities and 
that the number of these cycles is infinitely large puts 
them beyond all control, measurement, or computation. 
The time between the start and the return of a com 
modity is just as indefinite. Moreover, it is immaterial 
whether or not such a circuit has been actually described 
in a given case. No economic fact is more generally 
known than that one can spend money with one hand 
without getting it back with the other. Money proceeds 
from an endless number of points and returns to as many 
different points, but the coincidence of the starting and 
returning points is a matter of chance, because in the 
movement C M the turning of the buyer again into 
& seller is not a necessary condition. Still less doe? th 


circulation of money resemble a movement radiating 
from a common centre to all points of the periphery and 
back from the peripheral points to the centre. The so- 
called cycle described by money, as it is pictured, 
amounts simply to this, that at all points we observe its 
appearance and disappearance, its never ceasing transi 
tion from place to place. In a higher, more involved 
form of money circulation, e. g. bank-note circulation, 
we shall find that the conditions of emission of money 
include those for its return. But in the simple money 
circulation it is a matter of chance for the same buyer 
to become again a seller. Where we really see constant 
cycle motions taking place, they are only reflections of 
deeper forces in the sphere of production, e. g., the man 
ufacturer draws money from his banker on Friday, pay? 
it out to his workingmen on Saturday, the men im 
mediately pay out the greater part of it to the store 
keepers, etc., and the latter turn it in on Monday back 
to the banker. 

We have seen that money realizes simultaneously a 
certain number of prices in the variegated purchases and 
sales which take place side by side at the same time. On 
the other hand, in so far as its movement represents the 
movement of the combined metamorphoses of commodi 
ties and the interlacing of these metamorphoses, the 
same coin realizes the prices of different com 
modities and thus makes a larger or smaller number of 
moves. If we take the circulation of a country for a 
given length of time, say a day, the quantity of gold 
required for the realization of prices and, consequently, 
for the circulation of commodities, will be determined 


by two conditions : first, the sum total of the prices ; sec 
ond, the average number of moves made by one coin. 
This number of moves or the rapidity of circulation of 
money is in its turn determined by or expresses the 
average rapidity with which commodities go through the 
different phases of their metamorphoses, the rapidity 
with which these metamorphoses succeed one another, 
and with which those commodities that have gone 
through their metamorphoses are replaced by new com 
modities in the process of circulation. We have seen 
that in the process of the determination of prices the 
exchange value of all commodities is ideally converted 
into a certain quantity of gold of the same value and 
that the same amount of value is present in a double 
form in either of the isolated acts of circulation M C 
and C M, first embodied in the commodity, and second, 
in gold; yet gold enjoys the capacity of a medium of cir 
culation not by virtue of its isolated relation to separate 
commodities in a state of rest, but owing to its active 
presence in the dynamic world of commodities, viz., its 
function of expressing the change of form of commodi 
ties by its change of place and expressing the rapidity of 
their change of form by the rapidity of its change of 
place. The extent to which it is present in the sphere 
of circulation, i. e., the actual quantity of gold in cir 
culation, is thus determined by the extent to which it is 
discharging its function throughout the entire process. 

The circulation of money implies the circulation of 
commodities; money circulates commodities which have 
price?, i. e., which are beforehand ideally equated to cer 
tain quantities of gold. In the determination of the 


prices of commodities, the value of the quantity of gold 
which serves as a unit of measure, or the value of gold, 
is assumed to be given. Under that assumption the 
quantity of gold necessary for circulation is determined 
first of all by the sum total of the prices of commodities 
that are to be realized. But this sum is itself determined : 

1. By the level of prices, the relatively high or low ex 
change value of commodities estimated in gold; and 

2. By the mass of commodities circulating at fixed 
prices, i. e. by the number of purchases and sales at 
given prices. 1 If one quarter of wheat is worth 60 
shillings, then twice as much gold is required to circu 
late it or to realize its price as would be the case if it 
were worth only 30 shillings. To circulate 500 quar 
ters of wheat at GO shillings, twice as much gold is neces 
sary as for the circulation of 250 quarters at the same 
price. Finally, to circulate 10 quarters at 100 shillings 
only half as much money is necessary as when circu- 

1 The quantity of money is immaterial "pourvu qu il y en ait 
assez pour maintenir les prix contracted par les denrees" (as 
long as it is sufficient to maintain the existing prices of com 
modities). Boisguillebert, 1. c. p. 210. 

"If the circulation of commodities of four hundred millions 
required a currency of forty millions, and . . . this pro 
portion of one-tenth was the due level, estimating both cur 
rency and commodities in gold; then, if the value of commodi 
ties to be circulated increased to four hundred and fifty millions, 
from natural causes ... I should say the currency, in 
order to continue at its level, must be increased to forty-five 
millions." (William Blake, "Observations on the Effects Pro 
duced by the Expenditure of Government, etc.," London, 1823, 
p. 80.) 

lating 40 quarters at 50 shillings. It follows that the 
quantity of gold required for circulation may fall in 
spite of a rise in price, if the mass of commodities in cir 
culation declines in a greater ratio than the rise of the 
combined sum of prices; and, inversely, the quantity of 
the circulating medium may rise in spite of a decline 
of the mass of commodities in circulation, if the sum 
total of prices rises in a greater ratio. Thorough and 
minute English investigations have demonstrated e. g. 
that in the early stages of a dearth of grain in England 
the quantity of money in circulation increases, because 
the total price of the diminished supply of grain is 
greater than the former total price of a larger supply of 
grain, while the circulation of the other commodities 
continues imdisturbed for some time at their old price?. 
At a later stage of the dearth of grain, there is a decline 
in the quantity of circulating money, either because less 
goods are sold at old prices besides grain, or the same 
quantity of those goods is sold at lower prices. 

But. as we have seen, the quantity of money in cir 
culation is determined not only by the sum total of price? 
of commodities that are to be realized, but also by the 
rapidity with which money circulates or with which it 
completes this work of realization. If the same 
sovereign makes ten purchases a day, each of a com 
modity having a price of one sovereign, and thus changes 
hands ten times, it does as much work as would be ac 
complished by ten sovereigns each performing but a 
single act of circulation a day. 1 Consequently, rapidity 

1 "E la velocita del giro del danaro, non la qimntita dei nietalli 
rhe fa apparir molto a poco il danaro." (Galiani, 1. c. p. 99.) 

loo ~~ 

of gold circulation can make up for its quantity, 
or the presence of gold in the sphere of circulation is de 
termined not only by its presence as an equivalent of a 
commodity side by side with it, hut also by its partici 
pation in the movement of metamorphoses of commodi 
ties. The rapidity of the circulation of money, how 
ever, can serve as a substitute for its quantity only to a 
limited extent, since at any given moment an endless 
number of isolated purchases and sales takes places in 
different localities. 

If the total price of the commodities in circulation 
rises, but in a smaller ratio than the increase in the 
rapidity of circulation of money, the volume of the circu 
lating medium will diminish. If on the contrary the 
rapidity of circulation decreases in a greater ratio than 
the total price of the commodities in circulation, the vol 
ume of currency will increase. An increasing volume of 
currency combined with a general fall of prices or a di 
minishing volume of currency in connection with a gen 
eral rise of prices is one of the best known phenomena in 
the history of prices. But the consideration of the causes 
which bring about a simultaneous rise in the level of 
prices and a still greater rise in the rate of velocity of 
circulation of money, or the opposite phenomenon, falls 
outside of the sphere of simple circulation. By way of 
illustration, it may be mentioned that in periods of pre 
vailing credit, the rapidity of circulation of money grows 

("It is the rapidity of the circulation of money and not th 
quantity of metals that causes a reater or smaller amount of 
money to appear.") 


faster than the prices of commodities, while in times of 
declining credit the prices of commodities fall slower 
than the rapidity of circulation. The shallow and arti 
ficial character of the simple circulation of money is 
manifested in the fact that all the elements which have 
a determining influence on the volume of currency, such 
as the volume of commodities in circulation, prices, the 
rise or fall of prices, the number of simultaneous pur 
chases and sales, the rapidity of the circulation of 
money, depend on the metamorphic process which 
takes place in the world of commodities, and that 
again depends on the general character of the methods of 
production, the size of population, the relation between 
city and country, the development of the means of 
transportation, the greater or less division of labor, 
credit, etc. ; in short, on circumstances all of which lie 
outside of the sphere of simple circulation of money and 
are only reflected in it. 

The rapidity of circulation being given, the volume 
of currency is simply determined by the prices of com 
modities. Hence, prices are not high or low, because 
there is more or less money in circulation, but on the 
contrary, there is more or less money in circulation, be 
cause prices are high or low. This is one of the most 
important laws, whose demonstration in detail by means 
of the history of prices constitutes perhaps the only 
merit of the post-Ricardian English Political Economy. 
If experience shows, that the level of metallic circula 
tion or the mass of gold and silver in circulation in a 
given country is subject to temporary ebbs and tides 


and very violent ones at times, 1 but on the whole re 
mains stationary for long periods, the deviations form 
ing but small oscillations about the average level, this 
is explained by the antagonistic nature of the circum 
stances which determine the quantity of money in circu 
lation. Their simultaneous modifications neutralize 
their effects and leave everything where it was before. 

The law, that with a given rapidity of circulation of 
money and a given total sum of prices of commodities 
the quantity of the circulating medium is determined, 
may also be expressed as follows. If the exchange values 
of commodities and the average rapidity of their meta 
morphoses are given, the quantity of gold in circulation 
depends on its own value. If, therefore, the value of 
gold, i. e. the labor-time necessary for its production, 
should rise or fall, the prices of commodities will rise 

1 An example of an extraordinary decline of metallic circula 
tion from its average level was furnished by England in 1858, 
as may be seen from the following extract from the London 
Economist: "From the nature of the case (namely, the iso 
lated nature of simple circulation) very exact data cannot be 
procured as to the amount of cash that is fluctuating in the 
market, and in the hands of the not banking classes. But, 
perhaps, the activity or the inactivity of the mints of the great 
commercial nations is one of the most likely indications in 
the variations of that amount. Much will be manufactured 
when it is wanted; and little when little is wanted. . . . 
At the English mint the coinage was in 1855 9,245,000; 185G, 
6,476,000; 1857, 5,293,855. During 1858 the mint had 
scarcely anything to do." (Economist, July 10, 1858.) But 
at the same time about eighteen million pounds sterling were 
lying in the bank vaults. 


or fall in inverse ratio, and corresponding to that rise or 
fall of prices, the rapidity of circulation remaining the 
same, a larger or smaller quantity of gold would be re 
quired to keep the same volume of commodities in cir 
culation. The same change would occur, if the old 
standard of value were superseded by a more or less 
valuable metal. Thus, Holland required from fourteen 
to fifteen times as much silver as it had previously re 
quired gold, in order to circulate the same volume of com 
modities, when out of tender regard for the government 
creditors and out of fear of the effects of the discoveries 
in California and Australia it substituted silver for gold 

From the fact that the quantity of gold in circulation 
depends on the variable sum total of prices of commodi 
ties and the varying rapidity of circulation, it follows 
that the volume of the circulating medium must be 
capable of contraction and expansion; in short, that 
according to the requirements of circulation, gold must 
now enter, now leave the sphere of circulation in its 
capacity of a medium of circulation. How the circula 
tion process itself realizes these conditions, we shall see 
later on. 


In its capacity of a medium of circulation, gold ac 
quires a shape of its own, it becomes coin. In order to 
prevent any technical difficulties in the way of its circu 
lation, it is coined according to the standard of the 
money of account. Gold pieces whose imprints and 
legends show that they contain certain weights of gold 


corresponding to the reckoning names of money, , 
8., etc., are coins. The establishment of a mint-price, as 
well as the technical work of coining, are the business 
of the state. Both as money of account and as coin, 
money acquires a local and political clmracter; it speaks 
different languages and wears different national uni 
forms. The sphere in which money circulates as coin, 
is distinguished as an internal sphere of circulation 
which is separated from the universal sphere of circula 
tion in the commodity world by national boundaries. 

Yet, the only difference between gold bullion and gold 
coin is that between coin denomination and weight de 
nomination. What seems to be a difference in name in 
the latter case appears as a difference in shape in the 
former. Gold coin can be thrown into the melting-pot 
and thus be converted again into gold sans phrase, just 
as, on the contrary, gold bars only have to be sent to 
the mint to receive the shape of coins. The conversion 
and reconversion from one form into another appears to 
be a purely technical matter. 

For 100 pounds or 1200 ounces troy of 22 carat gold 
one can get 4,672 1/2 or gold sovereigns at the English 
mint ; if these sovereigns be put on one side of the weigh 
ing scale and one hundred pounds of gold bullion on the 
other, the two will balance each other, which proves that 
the sovereign is nothing but a piece of gold of certain 
weight bearing this name in English coinage and hav 
ing a shape and stamp of its own. The 4,672 }4 
sovereigns are put into circulation at different points, 
and once in its grasp they make a certain number of 
moves per day, some sovereigns more, others less. If the 


average number of moves per day of each ounce be ten, 
the 1200 ounces of gold would realize 12,000 ounces or 
46,725 sovereigns as the total price of commodities. 
You may turn and toss an ounce of gold in any way you 
like, and it will never weigh ten ounces. But here in the 
process of circulation one ounce practically docs weigh 
ten ounces. The work performed by a coin in the sphere 
of circulation is equivalent to the quantity of gold it- 
contains multiplied by the number of its moves. Be 
sides the actual importance which a coin possesses by 
virtue of its being an individual piece of gold of a def 
inite weight, it acquires an ideal significance due to its 
function. But whether the sovereign circulates once or 
ten times, in each particular purchase or sale it acts 
only as one sovereign. It is like a general who by timely 
appearance at ten different points on the battle field 
does the work of ten generals, but still remains the same 
identical general at each point. The idealization of the 
means of circulation which is due to the supplanting of 
quantity by rapidity in money circulation, affects only 
the function of the coin within the sphere of circulation, 
but not the nature of the individual coin. 

The circulation of money is a movement through 
the outside world, and the sovereign, though it non 
olet, keeps rather mixed company. In the course 
of its friction against all kinds of hands, pouches, 
pockets, purses, money-belts, bags, chests and strong 
boxes, the coin rubs off, loses one gold atom here 
and another one there and thus, as it wears off 
in its wanderings over the world, it loses more 
and more of its intrinsic substance. Bv being used 


it gets used up. Let us take up a sovereign at 
the moment when its natural, inborn character has 
been slightly affected. A baker, says Dodd, 1 who receives 
from the bank to-day a brand new sovereign and pays it 
to-morrow to the miller, does not pay the same veritable 
sovereign; the latter has become lighter than it was at 
the time he received it. It is clear, says an anonymous 
writer, 2 that in the very nature of things, coins must de 
preciate one by one as a result of ordinary and unavoid 
able friction. It is a physical impossibility to entirely 
exclude light coins from circulation at any time, even 
for one day. Jacob estimates that of the 380 million 
pounds sterling which were in existence in Europe in 
1809, nineteen million pounds sterling entirely disap 
peared by 1829, i. e., within a period of twenty years. 
Thus, while a commodity at its first step into the 
sphere of circulation, falls out of it, a coin, after 
a couple of steps within that sphere represents more 

1 Dodd, "Curiosities of Industry," etc., London, 1854. 

3 "The Currency Question Reviewed, etc., by a Banker." 
(Edinburgh, 1845, p. 69.) 

"Si un cu un peu us6 etait repute" valoir quelque chose de 
moins qu un e"cu tout neuf, la circulation se trouverait contin- 
uellement arrte, et il n y aurait pas un seul payement qui 
ne fut matiere a contestation." (G. Gamier, 1. c. t. I., p. 24.) 
("If an ecu slightly used would pass for a little less than an 
entirely new ecu, circulation would be continually interfered 
with, and not a payment would take place that would not give 
rise to controversy.") 

1 W. Jacob, "An Inquiry Into the Production and Consump 
tion of the Precious Metals." (London, 1831, vol. II., ch. 

metal than it actually contains. The longer a 
coin remains in circulation, the rapidity of circu 
lation remaining the same, or the greater its rapid 
ity of circulation within the same period of time, the 
greater the discrepancy between its form as coin and its 
actual gold or silver substance. What remains is magni 
nominis umbra. The body of the coin becomes but a 
shadow. If at first it became heavier through the 
process of circulation, it now becomes lighter on account 
of it, but continues to represent the original quantity 
of gold in each single purchase or sale. The sovereign, 
as a fictitious sovereign, as fictitious gold, continues to 
perform the function of a legitimate coin. While other 
beings lose their idealism in contact with the outer world, 
the coin is idealized by practice, being gradually trans 
formed into a mere phantom of its golden or silver body. 
This second idealization of metal money springing from 
the very process of circulation, or from the discrepancy 
between its nominal weight and its real weight is ex 
ploited in all kinds of coin counterfeiting practiced 
partly by governments, partly by private adventurers. 
The entire history of coinage from the beginning of the 
middle ages until late in the eighteenth century is noth 
ing but a history of these two-fold and antagonistic adul 
terations, and Custodi s voluminous collection of writ 
ings of Italian economists turns mostly about this point. 
But the fictitious importance of gold due to its func 
tion, comes in conflict with its real substance. One gold 
coin has lost more, another, less of its metal substance 
in the course of circulation, and one of them is, as a 
matter of fact, worth more now than the other. "But 


since in the discharge of their function of coins they 
are taken at the same value, the sovereign weighing a. 
quarter of an ounce passing for no more than the sov 
ereign which only stands for a quarter of an ounce, the 
full-weight sovereigns are subjected in the hands of un 
scrupulous owners to surgical operations which produce 
artificially what the circulation process has caused in a 
natural way to their more light-weighted brothers. They 
are clipped and reduced and the superfluous gold fat 
lands in the melting pot. If 4,672*/2 gold sovereigns 
when put on one side of the weighing scale weigh on an 
average only 800 ounces instead of 1200, they will buy 
when brought to the gold market only 800 ounces of 
gold ; that is, the market price of gold would rise above 
its mint price. Every coin, even if of full weight would 
pass in its mint form for less than in bullion form. The 
full weight sovereigns would be reconverted into bullion, 
a form in which a greater quantity of gold is always 
worth more than a smaller quantity. As soon as this 
decline of metallic weight would affect a sufficiently 
large number of sovereigns to bring about a permanent 
rise of the market price of gold above its mint price, the 
reckoning names of the coins, though remaining the 
same, would begin to denote a smaller quantity of gold. 
That is to say, the standard of money would change 
and gold would be coined in the future according to this 
new standard. By virtue of its idealization as a 
medium of circulation, gold would react upon and 
change the legally determined ratios under which it acted 
as the standard of price. The same revolution would be 
repeated after a certain length of time and thus gold 


would be subject to constant change both as a standard 
of price and as a medium of circulation, a change under 
one of these forms leading to a change under the other 
and vice versa. This explains the phenomenon men 
tioned above, namely that in the history of all modern 
nations the same money-name stands for a constantly 
diminishing quantity of metal. The contradiction be 
tween gold as coin and gold as standard of price be 
comes also one between gold as coin and gold as the 
universal equivalent; in the latter capacity it circulates 
not only within the limits of national boundaries, but 
in the world market. As a measure of value gold was 
always of full weight, because it served only as ideal gold. 
In its capacity of equivalent in the isolated transaction 
C M it passes at once from a state of motion to a state 
of rest ; but in its capacity of coin its natural substance 
comes in constant conflict with its function. The trans 
formation of the gold sovereign into fictitious gold can 
not be wholly avoided, but legislation seeks to prevent 
its unlimited circulation as coin by prescribing its with 
drawal from circulation as soon as its shortage of metallic 
substance reaches a certain degree. According to the 
English law, e. g., a sovereign which lacks more than 
0.747 grains of its weight ceases to be legal tender. The 
Bank of England which weighed forty-eight million gold 
sovereigns in the short period between 1844 and 1848, 
possesses in Mr. Cotton s gold weighing scale a machine 
which not only detects a difference of 1-100 part of a 
grain between two sovereigns, but like a sensible being, 
immediately throws out the light-weight coin on a board 


where it lands under another machine which cuts it np 
with oriental cruelty. 

That being the case, gold coins could not circulate 
at all were not their circulation confined to definite 
spheres in which they do not wear off so rapidly. In so 
far as a gold coin weighing only one-fifth of an ounce 
passes in circulation for a quarter of an ounce of gold, 
it is practically merely a sign or a symbol for one- 
twentieth of an ounce of gold, and in that way all gold 
coins are transformed by the very process of circula 
tion into more or less of a mere sign or symbol of their 
substance. But no thing can be its own symbol. Painted 
grapes are no symbol of real grapes, they are imaginary 
grapes. Still less can a light-weight sovereign be a sym 
bol of a full-weighted one, just as a lean horse can not 
serve as a symbol of a fat one. Since gold thus be 
comes a symbol of its own self, but at the same time can 
not serve in that capacity, it receives a symbolical, silver 
or copper substitute in those spheres of circulation in 
which it is most subject to wear and tear, namely where 
purchases and sales are constantly taking place on the 
smallest scale. In these spheres, even if not the same 
identical coins, still a certain part of the entire supply 
of gold money would constantly circulate as coin. To 
that extent gold is substituted by silver or copper tokens. 
Thus, while only a specific commodity can perform 
in a given country the function of a measure of value and 
therefore of money, different commodities can serve as 
coin side by side with gold. These subsidiary mediums 
of circulation, such a? silver or copper coins, represent 
definite fractions of a gold coin within the sphere of cir- 

dilation. Their own silver or copper weight is, there 
fore, not determined by the proportions of the respective 
values of silver and copper to that of gold, but is ar 
bitrarily fixed by law. They may be issued only in such 
quantities in which the diminutive fractions of gold coin 
which they represent would constantly circulate either 
for purposes of change for gold coins of higher denomina 
tions, or for realizing equally small prices of commodi 
ties. In retail trade silver and copper tokens belong to 
distinct spheres of circulation. In the nature of things, 
the rapidity of their circulation is in inverse ratio to 
the price which they realize- in each separate purchase or 
sale, or to the size of the fraction of gold coin which 
they represent. If we consider how immense the volume 
of the daily retail trade in a country like England is, 
we will understand from the comparatively insignificant 
proportions of its combined volume how rapid and steady 
the circulation of the subsidiary coin must be. From a 
parliamentary report of recent date we see, e. g., that in 
1857 the English mint coined 4,859,000 worth of gold, 
,733,000 of silver nominal value which contained metal 
actually worth 363,000. The total amount of gold 
coined in the ten years ending December 31, 1857, was 
55,239,000, and^of silver only 2,434,000. The sup 
ply of copper coin in 1857 amounted only to 6,720 
nominal value containing 3,492 worth of copper; of 
this 3,136 was in pennies, 2,464 in half-pennies, and 
1,120 in farthings. The total value of copper coined 
in the ten years was 141,477 nominal, the metallic 
value being 73,503. Just as gold coin is prevented 
from permanently n>tninin<i ifs function of coin by the 

legal provision of the lose of weight which demonetizes 
it, so are the silver and copper tokens prevented from 
passing from their spheres of circulation into that of 
gold coin and acquiring the character of money by the 
provision of the maximum amount for which they are 
legal tender. In England e. g. copper is legal tender 
only to the amount of six pence and silver up to forty 
shillings. If silver and copper tokens were to be issued 
in greater quantities than the requirements of their 
spheres of circulation call for, prices of commodities 
would not rise as a result, but the accumulation of these 
tokens in the hands of retail dealers would reach such an 
extent that they would be finally compelled to sell them 
as metal. Thus in 1798 English copper coins, issued by 
private individuals, accumulated in the hands of small 
traders to the amount of 20,350 which they tried in 
vain to put again in circulation, being finally compelled 
to throw them as metal on the copper market. 1 

The silver and copper tokens which represent gold 
coin in certain spheres of circulation in the interior of 
the country, contain a definite quantity of silver and 
copper prescribed by law, but after they get into circula 
tion, they wear off like gold coins and become even more 
rapidly mere phantoms, according to the rapidity and 
steadiness of their circulation. To draw again a line 
of demonetization beyond which silver and copper tokens 
would lose their character of coins, they would have to be 

* David Buchanan, "Observations on the Subjects Treated of 
in Dr. Smith s Inquiry on the Wealth of Nations," etc. (Edin 
burgh, 1841, p. 3.) 


replaced in turn within certain spheres of their own 
circulation by some other symbolic money, say iron 
and lead, and such representation of one kind of sym 
bolic money by another kind would form an endless 
process. In all countries with a well developed cir 
culation the very requirements of money circulation 
make it necessary that the character of silver and 
copper tokens as money be made independent of any 
loss of weight in those coins. Thus, as it was in the 
nature of things, it appears that they serve as sym 
bols of gold coin not because they are symbols made 
of silver or copper, not because they have certain 
value, but only in so far as they have no value. 

Relatively worthless things, such as paper, can con 
sequently perform the function of symbols of gold 
money. That subsidiary currency consists of metal 
tokens, such as silver, copper, etc., is mainly due to 
the fact that in most countries the less valuable metals 
such as silver in England, copper in ancient Rome, 
Sweden, Scotland, etc., had circulated as money be 
fore they were degraded by the process of circulation 
to the rank of small change and replaced by a more 
precious metal. Besides, it is natural that the money 
symbol which grows directly out of metallic circula 
tion, should itself be a metal. Just as that portion 
of gold which would always have to circulate as small 
change, is replaced by metal tokens ; so can the other 
portion of gold which is constantly absorbed as coin 
by circulation in the interior of the country and, 
therefore, must continually circulate, be replaced with 
worthless tokens. The level below which the mass of 
circulating coin never sinks is determined in each 


country by experience. Thus, the originally imper 
ceptible difference between the nominal weight and 
the metallic weight of a metal coin can grow apace 
until it reaches the point of absolute separation. The 
mint name of money parts company with its substance 
and exists outside of it in worthless slips of paper. 
Just as the exchange value of commodities is crystal 
lized by their process of exchange into gold money, 
so is gold money sublimated in its currency into its 
own symbol first in the form of worn coin, then in 
the form of subsidiary metal currency, and finally in 
the form of a worthless token, paper, mere sign of 

Gold coin has produced its substitutes, first metallic 
and then paper, only because in spite of its loss of 
metallic weight it continued to perform the function of 
coin. It did not circulate because of its wear and 
tear ; on the contrary, it wore out to a symbol because 
it continued to circulate. Only in so far as gold 
money becomes simply a token of its own value in the 
process of circulation, can mere tokens of value take 
its place. 

In so far as the movement C M C represents a 
dynamic unity of two processes C M and M C 
which pass directly one into the other, or in so far as 
a commodity passes through the complete process of 
its metamorphosis, it express its exchange value in 
price and in money only to discard that form at once 
and to become again a commodity or, rather, a use- 
value. That is to say, it develops only an apparent 
assertion of the independence of its exchange value. 
On the other hand, we have seen that gold, in so far 
as it performs the function of coin or in so far as it 


continually circulates, actually forms only a connect 
ing link between the metamorphoses of commodities 
and constitutes but their transitory money form; 
furthermore, that it realizes the price of one set of 
commodities only in order to realize that of another, 
but in no case does it constitute a stable form of ex 
change value or appear itself as a commodity in a 
state of rest. The reality which the exchange value 
of commodities acquires in the process and which is 
represented by gold in its circulation, is the reality of 
an electric spark. Although real gold, it plays the 
part of fictitious gold, and can, therefore, be replaced 
in this function by a token of itself. 

The token of value, say paper, which plays the part 
of coin, is the token of a quantity of gold expressed 
in its currency name, i. e., it is a gold token. Just 
as a certain quantity of gold does not in itself express 
a value ratio, so is that true of the token which takes 
its place. In so far as a certain quantity of gold, as 
embodied labor-time, has a value of a certain magni 
tude , the gold token represents value. But the mag 
nitude of the value which it represents depends all 
the time on the value of the quantity of gold for 
which it stands. As regards commodities the token 
of value expresses the reality of their price, it is sii;- 
mtm pretii and sign of their value only because their 
value is expressed in their price. In the process C 
M C, in so far as it represents the dynamic unity 
or direct alternation of the two metamorphoses and 
that is the aspect it assumes in the sphere of circula 
tion in which the token of value discharges its func 
tion the exchange value of commodities acquires in 


price only an ideal expression and in money only an 
imaginary symbolic existence. Exchange value thus 
acquires only an imaginary though material expres 
sion, but it has no real existence except in the com 
modities themselves, in so far as a certain quantity 
of labor-time is embodied in them. It appears, there 
fore, that the token of value represents directly the 
value of commodities, by figuring not as a token of 
gold but as a token of the value which exists in the 
commodity alone and is only expressed in price. But 
it is a false appearance. The token of value is di 
rectly only a token of price, i. e., a token of gold, and 
only indirectly a token of value of a commodity. 
Unlike Peter Shlemihl, gold has not sold its shadow, 
but buys with its shadow. The token of value oper 
ates only in so far as it represents the price of one 
commodity as against that of another within the 
sphere of circulation, or in so far as it represents gold 
to every owner of commodities. A certain compara 
tively worthless object such as a piece of leather, a 
slip of paper, etc., becomes by force of custom a 
token of money material, but maintains its existence 
in that capacity only so long as its character as a sym 
bol of money is guaranteed by the general acquies 
cence of the owners of commodities, i. e., so long as 
it enjoys a legally established conventional existence 
and compulsory circulation. Paper money "issued by 
the state and circulating as legal tender is the per 
fected form of the token of value, and the only form 
of paper money, which has its immediate origin in 
metallic circulation or even in the simple circulation 
of commodities. Credit money belongs to a higher 
sphere of the social process of production and is gov- 


erned by entirely different laws. Symbolic paper 
money does not in fact, differ in the least from sub 
sidiary metal coin, except that it reaches wider 
spheres of circulation. We have seen that the mere 
technical development of the standard of price or of 
the mint price and later the shaping of gold bullion 
into coin have called forth the interference of the 
state; this circumstance brought about a visible sep 
aration of national circulation from the world circula 
tion of commodities : this separation is completed by 
the evolution of coin into a token of value. As a 
mere medium of circulation money can assume an in 
dependent existence only within the sphere of na 
tional circulation. 

Our presentation has shown that the coin form of 
gold as a token of value differentiated from the gold 
substance itself, has its direct origin in the process of 
circulation and not in any agreement or state inter 
ference. Russia offers a striking example of the 
natural origin of the token of value. At the time 
when hides and furs played there the part of money, 
the conflict between the perishable and bulky nature 
of the material and its function as a medium of cir 
culation resulted in the custom of replacing it by small 
pieces of stamped leather which thus became a kind 
of draft payable in hides and furs. Later on they 
became under the name of copecs mere tokens for 
fractions of the silver rouble and remained in use in 
some parts until 1700, when Peter the Great ordered 
their withdrawal in exchange for small copper coins 

Henry Storch, "Coura ^ Economic Politique," etc., avec des 
notes par J. B Say. Paris, 1823, torn. IV., p. 179. Storch pub- 


issued by the state. Ancient writers who could 
observe the phenomena of exclusively metallic circu 
lation, already took the view of coin as a symbol or 
token of value. That is true both of Plato 1 and Aris 
totle.* In countries where credit is not developed, 

lished his work in French at St. Petersburg. J. B. Say imme 
diately issued a Parisian reprint, supplemented with alleged 
"notes," which as a matter of fact contain nothing but com 
monplaces. Storch (see his "Considerations sur la Nature du 
Revenue National," Paris, 1824) took hy no means kindly to 
this annexation of his work by the "prince de la science." 

Plato de Rep. L. II t v6 l ii<j l ia uy.6oXov tij<; dXXayij?." ("Money 
symbol of exchange.") Opera omnia, etc., ed. G. Stallbumius, 
London, 1850, p. 304. Plato develops money only in two ca 
pacities as a measure of value and a token of value, but de 
mands, in addition to the token of value serving for home cir 
culation, another one for trade between Greece and foreign 
countries. (See also Book V of his Laws.) 

Aristotle, Ethic. Nicom, 1. 5., ch. 8, 1. c. : olov 5 
TTJ? xpe(s tb v6[itqjia Y^T OV8 *<** auvOrjxnjv xat 
vdjitcjAcz. Sre ofi fuaet dXXa v6[x<p <ail, xat 9* ^[xTv (ieTs6aXetv xal *oc- 
Tjaat fixpTjsTov * ("1 the satisfaction of wants money became 
the medium of exchange by agreement. And for that reason 
it bears the name vdpuuna, because it owes its existence, not to 
nature, but to law ( v6[i<j> )> a "d ti is in our power to 
change it and make it void.") Aristotle had a far more 
comprehensive and deep view of money than Plato. In 
the following passage he beautifully shows how barter be 
tween different communities creates the necessity of as 
signing the character of money to a specific commodity, i. e., 
one which has itself an intrinsic value."S ev txti>T^pa; ydp 

-ij ToO vo[j.{<T(j.aTO<; IxopfaOrj XP^ ai ? ^tb icpb? xAg dXXayd? T- 
ouT6v Tt auv^Oevro icpii; c^a? oitoii; 8i86vat xal Xa^Savecv, 8 TWV yw 
a![Auv air?) ov elx ffjv xpefav e6neTaxefpt<rrov... olov cfSrjpo? x 
pos x5v eT Tt TOIOUTOV Itepov". (Arist. De Republioa, 1. i;, 
9, [sees. 7, 8] 1. c.) 


as e. g. in China, legal tender paper money is found 
at an early date. 1 . Early advocates of paper money 
expressely point out the fact that metallic coin is 
transformed into a token of value in the very process 

("When the inhabitants of one country became more de 
pendent on those of another, and they imported what they 
needed and exported the surplus, money necessarily came into 
use . . . and hence men agreed to employ in their deal 
ings with each other something which was intrinsically useful 
and easily applicable to the purposes of life, for example, iron, 
silver and the like." Trans, by B. Jowett, "The Politics of Ar 
istotle, Oxford, 1885, p. 10). This passage is quoted by Michel 
Chevalier, who either has not read Aristotle or did not under 
stand him, to prove that in Aristotle s opinion currency must 
consist of a substance having intrinsic value. On the contrary, 
Aristotle says expressly that money as a mere medium of cir 
culation seems to owe its existence to agreement or law, as is 
shown by its name v6(Jtto{j.a- and that in reality it owes its 
utility as coin to its function and not to any intrinsic use- 
value of its own. Xfjpo? eivat So/s! tb v6;juo[i<z xal v6[j.o<; icavTixaot, 
fiioet 8* ouSJv 2tt (ieTaOe tvwv Tt TWV xpw^lvwv o05evb<; fi^tov o&Se 
Xpf)clio rcpix; oMev *wv dvotYxai uv <<::( ("Others maintain that 
coined money is a mere sham, a thing not natural, but conven 
tional only, which would have no value or use for any of the 
purposes of daily life if another commodity were substituted 
by the users." (1. c. sec. 11.) 

Mandeville, S ir John. "Voyages and Travels," London, 
1705, p. 10.": "This Emperor (of Cattay or China) may dis- 
pende ols muche as he wile withouten estymacion. For he 
despendethe not, nor makethe no money, but of lether em- 
predeth, or of papyre. And when that money bathe ronne so 
longe that it begyncthe to waste, than men beren it to the 
Emperoure Tresorye, and then they taken newe Money for 
the old. And that money gothe thorghe out all the contree, 
and thorge out all his Provynces. . . . They make no 
money nouther of Gold nor of Sylver." and "therefore," thinks 
Mandeville, "he may despende ynew and outrageously." 


of circulation. So Benjamin Franklin 1 and Bishop 
Berkeley. 2 

How many reams of paper cut up into bills can cir 
culate as money ? Put in that way, the question would 
be absurd. The worthless tokens are signs of value 
only in so far as they represent gold within the sphere 
of circulation and they represent it only to the ex 
tent to which it would itself be absorbed as coin by 
the process of circulation ; this quantity is determined 
by its own value, the exchange values of the com 
modities and the rapidity of their metamorphoses 
being given. Bills of a denomination of 5 could 
circulate in a quantity five times less than those of 1 
denomination, and if all payments were made in shill 
ing bills, then twenty times as many shilling bills 
would have to be in circulation as are one pound bills. 
If the gold currency were represented by bills of 

Benjamin Franklin, "Remarks and Facts Relative to the 
American Paper Money," 1764, p. 348, 1. c. "At this very 
time, even the silver money in England is obliged to the legal 
tender for part of its value; that part which is the difference 
between its real weight and its denomination. Great part 
of the shillings and sixpences now current are by wearing be 
come 5, 10, 20, and some of the sixpences even 50 per cent., too 
light. For this difference between the real and the nominal you 
have no intrinsic value. You have not so much as paper, you 
have nothing. It is the legal tender, with the knowledge that 
it can easily be repassed for the same value, that makes three- 
pennyworth of silver pass for a sixpence." 

2 Berkeley, 1. c., p. 5-6. "Whether the denominations being 
retained, although the bullion were gone . . . might not 
nevertheless ... a circulation of commerce (be) main 
tained ?" 


different denominations, e. g. five pound, one pound 
and ten shilling bills, then the quantity of these dif 
ferent tokens of value would be determined not only 
by the quantity of gold necessary for circulation as 
a whole, but also by that required in the sphere of 
circulation of each kind of bills. If fourteen million 
pounds sterling (this is the provision of the English 
Bank Law, not for the entire currency but only for 
credit money) were the level below which the circu 
lation of a country never sank, then fourteen million 
paper bills, each a token of value of one pound, could 
circulate. If the value of gold fell or rose because 
the labor-time necessary for its production had fallen 
or risen, then, the exchange value of the same volume 
of commodities remaining the same, the number of 
one pound bills in circulation would rise or fall in 
inverse ratio to the change in the value of gold. If 
gold were replaced by silver as a measure of value, 
the ratio of the respective values of silver and gold 
being 1 :15, and if each bill were to represent now the 
same quantity of silver as it represented gold before, 
then there would be 210 million one pound bills in cir 
culation instead of the previous fourteen million. 
The number of paper bills is thus determined by the 
quantity of gold money which they represent in cir 
culation, and since they are tokens of value only in 
so far as they represent it, their value is simply deter 
mined by their quantity. Thus, while the quantity of 
gold in circulation is determined (by the prices of com 
modities, the value of the paper bills in circulation, 
on the contrary, depends exclusively on their own 

The interference of the state which issues paper 


money as legal tender and we are treating of paper 
money of that kind only seems to do away with the 
economic law. The state which in its mint price gave 
a certain name to a piece of gold of certain weight, 
and in the act of coinage only impressed its stamp 
on gold, seems now to turn paper into gold by the 
magic of its stamp. Since paper bills are legal tender, 
no one can prevent the state from forcing as large a 
quantity of them as it desires into circulation and 
from impressing upon it any coin denomination, such 
as 1, 5, 20. The bills which have once gotten into 
circulation can not be removed, since on the one hand 
their course is hemmed in by the frontier posts of 
the country and on the other they lose all value, use- 
value as well as exchange-value, outside of circula 
tion. Take away from them their function and they 
become worthless rags of paper. Yet this power of 
the state is a mere fiction. It may throw into circu 
lation any desired quantity of paper bills of whatever 
denomination, but with this mechanical act its control 
ceases. Once in the grip of circulation and the token 
of value or paper money becomes subject to its in 
trinsic laws. 

If fourteen million pounds sterling were the quan 
tity of gold required for the circulation of commod 
ities and if the state were to put into circulation two 
hundred and ten million bills each of the denomina 
tion of 1, then these two hundred and ten millions 
would become the representatives of gold to the 
amount of fourteen million pounds sterling. It would 
be the same as if the state were to make the one 
pound bills represent a fifteen times less valuable 
metal or a fifteen times smaller weight 

of gold. Nothing would be changed but the nomencla 
ture of the standard of price, which by its very nature 
is conventional, no matter whether such change takes 
place as a direct result of a change of the mint stand 
ard or indirectly owing to an increase of paper bills to 
an extent required by a new lower standard. Since the 
name would stand now for a fifteen times smaller 
quantity of gold, the prices of all commodities would 
increase fifteen times and two hundred and ten million 
one pound bills would now be actually as necessary as 
fourteen million had been before. To the same extent 
to which the combined quantity of tokens of value would 
increase now, the quantity of gold which each of them 
represents would decrease. The rise of prices would 
constitute but a reaction on the part of the process of 
circulation which forcibly equates the tokens of value to 
the quantity of gold which they are supposed to replace. 
In the history of the debasement of money in England 
and France by their governments, we find repeatedly that 
prices had not risen in the same proportion in which the 
silver coinage had been debased. That was simply due 
to the fact that the proportion in which the currency 
was increased did not correspond to the proportion in 
which it had been debased ; that is to say, because an 
inadequate quantity of coins of the poorer metallic com 
position was issued, if the exchange values of commodi 
ties were to be estimated in the future in the new coin as 
a measure of value and be realized in coins correspond 
ing to tliis smaller unit of measure. This solves the dif 
ficulty left unsettled in the controversy between Lockf> 
and Lowndes. The ratio which a token of value, whether 


made of paper or of debased gold or silver, bears to cer 
tain weights of gold or silver estimated according to the 
mint price, depends not on its own composition but on 
the quantity in which it is found in circulation. The 
difficulty in understanding this is due to the fact that 
money in its two functions of a measure of value and a 
medium of circulation is subject to two not only op 
posite but apparently contradictory laws corresponding 
to the difference in the two functions. In the discharge 
of its function of a measure of value where money 
serves merely as money of account and gold only as ideal 
gold, everything depends on the natural substance of 
money. Estimated in silver or expressed in silver prices 
exchange values are naturally estimated quite differently 
than when measured in gold or as gold prices. On the 
contrary, in its function of a medium of circulation, 
where gold is not only imagined but is actually present 
side by side with other commodities, its substance is 
immaterial and everything depends on its quantity. For 
the unit of measure the determining factor is whether 
it consists of a pound of gold, silver or copper ; while in 
the case of coin, no matter what its own composition is. 
it will become the embodiment of each of these units of 
measure in accordance with its quantity. But it goes 
against common sense that in the case of mere imaginary 
money everything should depend on its material sub 
stance, while in that of the palpably present coin all 
should be determined by an ideal ratio of numbers. 

The rise or fall of prices of commodities following a 
rise or fall of the quantity of paper notes the latter 
only where paper currency constitutes the exclusive 


medium of circulation is thus nothing but an asser 
tion through the process of circulation of a law me 
chanically violated from without; namely, that the 
quantity of gold in circulation is determined by the 
prices of commodities, and the quantity of tokens of 
value in circulation is determined by the quantity of 
gold coin which it represents. For that reason any 
desired number of paper notes will be absorbed and 
equally digested by the process of circulation, because 
the token of value, no matter with what gold title it 
may enter circulation, will be compressed within the 
latter to a token of that quantity of gold which could 
actually circulate in its place. 

In the case of the circulation of tokens of value all 
laws pertaining to the circulation of real money ap 
pear to be reversed and standing on their heads. 
While gold circulates because it has value, paper has 
value because it circulates. While with a given ex 
change value of commodities, the quantity of gold 
in circulation depends on its own value, the value of 
paper depends on its own quantity in circulation. 
While the quantity of gold in circulation rises or falls 
with the rise or fall of prices of commodities, the 
prices of commodities seem to rise or fall with the 
change in the quantity of paper in circulation. While 
the circulation of commodities can absorb only a 
definite quantity of gold coin and as a result of that 
the alternating contraction and expansion of the cur 
rency appears as a necessary law, paper money seems 
to enter circulation in any desired amount. While 
the state is guilty of debasing gold and silver coin and 
of disturbing their function of a medium of circula- 


tion, if it turns out a coin, only 1-100 of a grain be 
low its nominal weight; it performs a perfectly 
proper operation by issuing absolutely worthless 
paper notes which contain nothing of the metal ex 
cept its mint denomination. While gold coin ap 
parently represents the value of commodities only in 
so far as that value is itself estimated in gold or is 
expressed in price, the token of value seems to repre 
sent directly the value of commodities. It is, there 
fore, clear why students who examined one-sidedly 
the phenomena of circulation of money by confining 
their observations to the circulation of legal tender 
paper money, should have failed to grasp the in 
trinsic laws governing the circulation of money. As 
a matter of fact, these laws appear not only reversed 
but extinct in the circulation of tokens of value, since 
paper currency, if issued in the right quantity, goes 
through certain movements which are not in its 
nature as a token of value, while its proper move 
ment instead of growing directly out of the meta 
morphosis of commodities, springs from the violation 
of its proper proportion to gold. 

3. MONEY. 

Money as distinguished from coin, the result of the 
circulation process C M C, forms the starting point 
of the circulation process M C M, i. e. the exchange 
of money for commodity in order to exchange com 
modity for money. In the form C M C, commodity 
forms the starting and final points of the movement ; in 
the form M C M, money plays that part. In the 
former case money is the medium of exchange of com 
modities, in the latter the commodity helps money to 
become money. Money which appears merely as a 
means of circulation in the first form becomes an end 
in the second form; while commodity which appeared 
first as the end, now becomes but a means. Since money 
is itself the result of circulation C M C, the result 
of circulation appears at the same time as its starting 
point in the form M C M. While in the case of 
C M C the interchange of matter constituted the real 
import of the process, the form of the commodity re 
sulting from this first process constitutes the import 
of the second process M C M. 

In the form C M C the two extreme members are 
commodities of the same value, but qualitatively different 
use-values. Their mutual exchange C C constitutes 


actual interchange of matter. In the form M C M 
the two extremes are gold and at the same time gold of 
equal value. To exchange gold for a commodity in 
order to exchange the commodity for gold, or if we con 
sider the final result M M, to exchange gold for gold, 
seems absurd. But if we translate the formula M C 
M into the expression : to buy in order to sell, which 
means nothing but to exchange gold for gold through 
an intervening movement, we recognize at once the pre 
vailing form of capitalist production. In actual prac 
tice, however, people do not buy in order to sell, but they 
buy cheap in order to sell dear. Money is exchanged for 
a commodity in order to exchange the same commodity 
for a larger amount of money, so that the extremes M, 
M are, if not qualitatively, then quantitatively different. 
Such a quantitative difference presupposes the exchange 
of non-equivalents, yet commodity and money as such are 
only opposite forms of the same commodity, i. e. they 
are different forms of the same magnitude of value. The 
circuit M C M thus conceals under the forms of 
money and commodity more highly developed relations 
of production, and is but a reflection within the sphere 
of simple circulation of a movement of a more advanced 
character. Money, as distinguished from the medium of 
circulation, must therefore be developed from the direct 
form of circulation of commodities, C M C. 

Gold, i. e., the specific commodity which serves as a 
measure of value and a medium of circulation, becomes 
money without any further assistance on the part of so 
ciety. In England, where silver is neither the measure 
of value nor the prevailing medium of circulation, it 


does not become money, just as gold in Holland, as soon 
as it had been dethroned as a measure of value, ceased 
to be money. A commodity thus becomes money only in 
its combined capacity of a measure of value and medium 
of circulation ; or, the unity of the measure of value and 
medium of circulation is money. As such a unity, how 
ever, gold has a separate existence independent of its 
existence in the two functions. As a measure of value 
it is only ideal money and ideal gold ; as a mere medium 
of circulation it is symbolic money and symbolic gold ; 
but in its plain metallic bodily form gold is money or 
money is real gold. 

Let us now consider for a moment the commodity 
gold when it is in a state of rest, and plays the part of 
money in its relation to other commodities. All com 
modities represent in their prices a certain quantity of 
gold, that is to say, they are merely imaginary gold of 
imaginary money, representatives of gold, just as, on 
the other hand, money in the form of a token of value 
appeared as a mere representative of prices of commod 
ities. 1 Since all commodities are thus but imaginary 
money, money is the only real commodity. Contrary to 
commodities, which only represent the independently ex 
isting exchange value, i. e., universal social labor, or ab 
stract wealth, gold is the material form of abstract 

*"Non solo i metalli ricchi son scgni dollc cose . . .; in* 
vicendevolmente le cose . . . sono scgni dell oro e dell ar 
gento." (A. Genovesi, "Lezioni di Economia Civile," 1765, p. 
281 in Custodi, P.irte Mod. 1. VIII.) ("Not only are precious 
metals tokens of things, but vice versa, things are tokens of 
gold and silver.") 


wealth. Through its use-value, every commodity, by its 
relation to some particular want, expresses only one 
aspect of material wealth, but one side of wealth. Money, 
however, satisfies every want since it can be directly 
converted into the object of any want. Its own use- 
value is realized in the endless series of use-values which 
form its equivalents. In its virgin metallic state it 
holds locked up all the material wealth which lies un 
folded in the world of commodities. Thus, while com 
modities represent in their prices the universal equiva 
lent or abstract wealth, viz., gold, the latter represents 
in its use-value the use-values of all commodities. Gold 
is, therefore, the bodily representative of material 
wealth. It is the "precis de toutes les choses" (Bois- 
guillebert), the compendium of the wealth of society. 
At one and the same time, it is the direct incarnation 
of universal labor in its form, and the aggregate of all 
concrete labor in its substance. It is universal wealth 
individualized. 1 As a medium of circulation it under 
went all kinds of injury, was clipped, and even reduced 
to the condition of a mere symbolic paper rag. As 
money it is restored to its golden glory. 2 From a serve 

1 Petty. "Gold and silver are universal wealth." ( Political 
Arithmetic, 1. c., p. 242.) 

*E. Misselden. "Free Trade, or the Means to Make Trade 
Flourish," etc., London, 1622. "The natural matter of Com 
merce is Merchandise, which Merchants from the end of Trade 
have stiled Commodities. The Artificiall matter of Commerce 
is Money, which hath obtained the title of sinewes of warre 
and of State. . . . Money, though it be in nature and time 
after Merchandise, yet forasmuch as it is now in use become 

it becomes a lord. From a mere understrapper it rises 
to the position of Lord of commodities. 1 


Gold separates itself as money from the process of 
circulation whenever a commodity interrupts the pro 
cess of its metamorphosis and remains in its form of a 
gold chrysalis. This occurs every time a sale is not im 
mediately followed by purchase. The independent is 
olation of gold as money is, thus, a material expression 
of the disintegration of the process of circulation, or of 
the metamorphosis of commodities, into two separate 
acts independent of each other. The coin itself be 
comes money as soon as its course is interrupted. In 
the hands of the seller who takes it in exchange for 

the chiefe." (p. 7.) He compares his own treatment of mer 
chandise and money with the manner of "Old Jacob, who, 
blessing his Grandchildren, crost his hands, and laide his right 
hand on the yonger, and his left hand on the elder." (1. c. ) 
Boisguillebert, "Dissert, sur la Nature Des Richesses," etc. 
"Violfi done 1 esclave du commerce devenu son mnitre . . . 
La misere des peuples ne vient que de ce qu 6n a fait un maltre, 
on plutdt un tyran de ce qui rtait un esclave." (p. 395, 399.) 

1 Boisguillebert, 1. c. "On a fait une idole de ces niOtaux 
(1 or et 1 argent) et Inissant la, 1 objet et 1 intention pour 
k squels ils avaient te appe leV dans le commerce, savoir, pour 
y servir de gages dans 1 echange et la tradition reeiproque, on 
Ics a presque quitted de ce service pour en former des divinite s, 
nux quelles on a pacrifig et sacrine toujours plus de biens ct de 
besoins procieux et mPme d hommes. que jamais 1 aveugle an- 
tiquitl n en immola i\ oes fausses divinit^s," etc. (1. c., p. 395.) 


his commodity, it is money and not coin; as soon as 
it passes out of his hands it is again coin. Everybody 
is a seller of the one commodity which he produces, but 
a buyer of all other commodities which he needs for his 
existence in society. While his selling is determined by 
the labor-time required for the production of his com 
modity, his buying is determined by the continual re 
newal of the wants of life. In order to be able to buy 
without having sold anything, he must sell without buy 
ing. In fact, the circulation process C M C is a 
dynamic unity of sale and purchase only in so. far as it 
constitutes at the same time the constant process of its 
separation. In order that money should flow continu 
ously as coin, coin must constantly coagulate as money. 
The continuous flow of coin depends on its constant 
accumulations in the form of reserve-funds of coin 
which spring up throughout the sphere of circulation 
and form sources of supply ; the formation, distribution, 
disappearance, and reformation of these reserve funds 
is constantly changing, their existence constantly dis 
appears, their disappearance constantly exists. Adam 
Smith expressed this never-ceasing transformation of 
coin into money and of money into coin by saying that 
every owner of commodities must always keep in supply 
besides the particular commodity which he sells, a cer 
tain quantity of the universal commodity with which he 
buys. We saw, that in the process C M C the second 
member M C splits up into a series of purchases which 
do not take place at once, but at intervals of time, so 
that one part of M circulates as money while the other 
rests as money. Money is in that case only suspended 


coin and the separate parts of the circulating mass of 
coins appear now in one form, now in another, constant 
ly changing. This first transformation of the medium 
of circulation into money represents, therefore, but a 
technical aspect of money circulation. 1 

The primitive form of wealth is that of a surplus or 
superabundance, i. e., that part of the products whicli 
are not immediately required a? use-values, or the pos 
session of such products whose use- value falls outside 
the sphere of mere necessaries. When considering the 
transition of commodity into money we saw that this 
surplus or superabundance of products constitutes the 
proper sphere of exchange at a low stage of development 
of production. Superfluous products become exchange 
able products or commodities. The adequate form of 
this surplus is gold and silver, the first form in which 
wealth as abstract social wealth is preserved. Commod 
ities can not only be stored up in the form of gold and 
silver, i. e., in the substance of money, but gold and 

1 In the first halt of the perpetuum mobile, t. e., in the 
suspension of the function of money as a medium of circulation, 
Boisguillebert at once suspects its independent existence from 
commodities. Money, he says, must be "in constant motion, 
it can be money only by beirn^ mobile, but as soon as it be 
comes motionless all is lost." ("Dans un mouvoment con- 
tinuel, ce qui ne peut etre que tant qu il est meuble, mais 
sitot qu il devient immeuble tout est perdu." ("Lc Detail de 
la France," p. 231.) What he overlooks is that this halt 
constitutes the condition of its movement. What he really 
wants is that the value form of commodities should appear 
merely in the transitory form of their change of matter, but 
should never become an end in itself. 


silver are wealth in preserved form. While every use- 
value performs its service as such by being consumed, 
i. e., destroyed, the use-value of gold as money con 
sists in its being the bearer of exchange value, in em 
bodying universal labor-time as a shapeless raw material. 
As shapeless metal, exchange value posseses an inde 
structible form. Gold or silver thus brought to rest as 
money, forms a hoard. Among nations with an exclu 
sively metallic circulation, such as the ancients were, 
hoarding is practiced universally from the individual 
to the state which guards its state hoard. In more 
ancient times, in Asia and Egypt, these hoards under 
the protection of kings and priests appear rather as a 
mark of their power. In Greece and Eome it was part 
of public policy to accumulate state hoards as the safest 
and most available form of surplus. The quick transfer 
of such hoards by conquerors from one country to an 
other and the sudden outpour of a part of these hoards 
into the general circulation constitute a peculiar feature 
of ancient economy. 

As the incarnation of labor-time gold is a pledge for 
its own value, and since it is the embodiment of univer 
sal labor-time, the process of circulation pledges gold 
its constant role of exchange value. Owing to the mere 
fact that the owner of commodities can retain his com 
modity in the form of exchange value or retain the ex 
change-value as a commodity, the exchange of commod 
ities for the purpose of retaining them in the trans 
formed shape of gold becomes circulation s own motive. 
The metamorphosis C M takes place for the sake of 
the metamorphosis, i. e., in order to transform it from 


particular natural wealth into universal social wealth. 
Instead of change of matter, change of form becomes its 
own purpose. From a mere form of the movement ex 
change value becomes its substance. Commodity is pre 
served as wealth, as commodity, only in so far as it 
keeps within the sphere of circulation, and it keeps in 
that fluent state only in so far as it solidifies in the form 
of silver and gold. It remains in the stream of circu 
lation as its crystal. At the same time gold and silver 
themselves become money only in so far as they do not 
play the part of mediums of circulation. As non- 
mediums of circulation they become money. The with 
drawal of a commodity from circulation in the form of 
gold is therefore the only means oi keeping it con 
stantly within the sphere of circulation. 

The owner of commodities can receive money from cir 
culation only in return for a commodity which he gives 
to it. Constant selling, continual throwing of com 
modities into circulation is, therefore, the first condition 
of hoarding from the standpoint of the circulation of 
commodities. On the other hand, money as a medium 
of circulation constantly disappears in the very process 
of circulation by being realized all the time in use-values 
and becoming dissolved in fleeting pleasures. It must, 
therefore, be taken out of the all-consuming stream of 
circulation or the commodity must be kept up in its 
first metamorphosis, so that money is prevented from 
performing its function of a means of purchase. The 
commodity owner who has now become a hoarder, must 
sell ns much as possible nnd buy as little as possible, as 
old Cato had taught: "patrem familias vendacem, non 


emacem esse." While industry constitutes the positive 
condition of hoarding, saving forms the negative one. 
The less the equivalent of a commodity is withdrawn 
from circulation in the form of particular commodities 
or use-values, the more it is withdrawn in the shape of 
money or exchange value. 1 The acquisition of wealth 
in its universal form thus requires abstinence from 
wealth in its material reality. Thus the stimulating 
impulse for hoarding is greed, the objects of which are 
not commodities as use-values, but exchange value as 
commodity. In order to get possession of the surplus 
injrts universal form, the particular wants must be 
treated as so much luxury and excess. Thus the Cortes 
presented a report to Philipp II., in 1593, in which, 
among other things, was said: "The Cortes of Valla- 
Jolid in the year 1586 petitioned Your Majesty not to 
allow the further importation into the Kingdom of can- 
illes, glassware, jewelry, knives and similar articles ; 
these things useless to human life come from abroad 
to be exchanged for gold, as though the Spaniards were 
Indians." The hoarder despises the worldly, tempo 
rary and transitory enjoyments in his hunt after the 
eternal treasure, which neither moth nor rust can eat, 
which is perfectly celestial and earthly at the same time. 
"The general remote cause of our want of money is the 
great excess of this Kingdom in consuming the Com 
modities of Forreine Countries, which prove to us discom- 

... The more the stock ... is ... en- 
creased in wares, the more it decreaseth in treasure." (E. 
Misselden. 1. e., p. 23.) 


modities, in hindering us of so much treasure, which 
otherwise would bee brought in, in lieu of those toyes 
. . . Wee . . . consume amongst us, that great 
abundance of the Wines of Spaine, of France, of the 
Rhene, of the Levant . . . the Raisins of Spaine, 
the Corints. of the Levant, the Lawnes and Cambricks of 
Hannaults . . . the Silkes of Italic, the Sugers and 
Tobaco of the West Indies, the Spices of the East Indies : 
All which are of no necessetie unto us and yet are 
bought with ready mony." 1 

In the form of gold and silver, wealth is indestructi 
ble, both because exchange value is preserved in the 
shape of indestructible metal, and, especially, because 
gold and silver are prevented from becoming, as me 
diums of circulation, mere vanishing money forms of 
the commodity. The destructible substance is thus sac 
rificed for the indestructible form. "If money be taken 
(by means of taxation) from him, who spendeth the 
same . . . upon eating and drinking, or any other 
perishing Commodity ; and the same transferred to one 
that bestoweth it on Cloaths; I say that even in this 
case the Commonwealth hath some little advantage ; bo- 
cause Cloaths do not altogether perish so soon as Meats 
and Drinks. But if the same be spent in Furniture of 
Houses, the advantage is yet a little more; if in Building 
of Houses, yet more; if in improving of Lands, working 
of Mines, Fishing, etc., yet more; but most of all, in 
bringing Gold and Silver into the Country ; because those 
things are not only not perishable, but are esteemed for 

1 1. c., p. 11-13 passim. 


Wealth at all times and everywhere ; whereas other Com 
modities which are perishable, or whose value depends 
upon the Fashion ; or which are contingently scarce and 
plentiful, are Wealth, but pro hie et mine." 1 The with 
drawal of money from the stream of circulation and the 
saving of it from the social interchange of matter reaches 
its extreme form in the burr/ing of money, so that social 
wealth is brought as an underground indestructible 
treasure into a perfectly secret private relation with the 
owner of commodities. Dr. Bernier, who stayed for 
some time at the court of Aurenzeb at Delhi, tells ua 
how the merchants, especially the Mohammedan heath 
ens, who control nearly all the trade and all money, 
secretly bury their money deep in the ground, "being 
imbued with the faith that the gold and silver which 
they put away during their lives will serve them after 
death in the next world." 2 However, in so far as the as 
ceticism of the hoarder is combined with active in 
dustry, he is rather a Protestant by religion and still 
more a Puritan. "It can not be denied that buying and 
selling are necessary, that one can not get along without 
them, and that one can buy like a Christian especially 
things that serve in need and in honor; for the patri 
archs had also bought and sold cattle, wool, grain, but 
ter, milk and other goods. They are gifts of God which 
He gives out of the earth and divides among men. But 

1 Petty, "Political Arith.," 1. c., p. 196 (1899 edition, v. I, p. 
269. Transl.) 

1 Francois Bernier, "Voyage contenant la description des 
Stats du Grand Mogul." (Paris edition, 1830, t. 1., conf., p. 

- 174 

foreign trade which brings over from Calcutta, India 
and other such places commodities consisting of costly 
silks, and gold ware, and spices which only serve for 
luxury and are of no use, draining the land and the 
people of their money, should not he tolerated if we but 
had a government of princes. Yet I do not wish to 
write of that now, for I believe it will have to stop of 
itself, when we have no money any longer; and so will 
luxury and gluttony; for no writing or teaching will 
help until want and poverty will force us." 1 

In times of disturbance in the process of the social 
interchange of matter, the burying of money takes place 
even in bourgeois societies which are at a high stage of 
development. The social bond in its compact form is 

Dr. Martin Luther, "Biicher voni Kaufhandel und Wucher." 
1524. In the same passage Luther says: "Gott hat uns 
Deutsche dahin geschleidert, dass wir unser gold und silber 
miissen in fremde Lander stossen, alle Welt reich machen und 
selbst Bettler Bleiben. England sollte wohl weniger Goldes 
haben, wenn Deutschland ihm sein Tuch liesse, und der Konig 
von Portugal sollte auch weniger haben, wenn wir ihm die 
Wtirze liessen. Rechne Du, \vie viel eine Messe zu Frank 
furt aus Deutschen Landen gefiirt wird, ohne Not und Ursache: 
so wirst Du Dich wundern, wie es zugehe, dass noch ein heller 
in Deutschen Landen sei. Frankfurt 1st das Silber-und Gold- 
loch, dadurch aus Deutschem Lande fleisst, was nur guillet 
und wachst, gemiinzt oder geschlagen wird bei uns ; wiire das 
Loch zuegestopft, so dtirft man itzt der Klage nicht horen, die 
allethalben eitel Schuld und kein Geld, alle Land und Stiidte 
it usgewuchert sind. Abcr lass gehen, es will doch also gehen ; 
wir Deutsche mtissen Deutsche bleiben ! wir lassen nicht ab, wir 
milssen denn." 

In the work quoted above Missel den wishes to retain the gold 


being saved from the social movement (with the owner 
of commodities this bond is the commodity and the ade 
quate form of the commodity is money). The social 
nervus rerum is buried next to the body whose nerve it 

The hoard would now become mere useless metal, 
its money soul would depart from it and it would re 
main as the burnt ashes of circulation, as its caput 
mortuum, if it did not constantly tend to get back into 
circulation. Money, or crystallized exchange value, is, 
according to its nature, the form of abstract wealth ; 
but, on the other hand, any given sum of money is a 
quantitatively limited magnitude of value. The quan 
titative limitation of exchange value is in contradiction 
with its qualitative universality and the hoarder con- 

and silver at least within the confines of Christendom: "The 
other forreine remote causes of the want of money, are the 
Trades maintained out of Christendome to Turky, Persia and 
the East Indies, which trades are maintained for the most part 
with ready money, yet in a different manner from the trades 
of Christendome within itselfe. For although the trades within 
Christendome are driven with ready monies, yet those monies 
are still contained and continued within the bounds of Christen 
dome. There is indeede a fluxus and refluxus, a flood and ebbe 
of the monies of Christendome traded within it selfe ; for some 
times there is more in one part of Christendome, sometimes 
there is lesse in another, as one Country wanteth and an 
other aboundeth: It cometh and goeth, and whirleth about 
the Circle of Christendome, but is still contained within the 
compasse thereof. But the money that is traded out of Chris 
tendome into the parts aforesaid is continually issued out and 
never returneth againe." (p. 19-20.) 


ceivee in it a barrier which turns, in fact, into a quali 
tative barrier as well and makes of the hoard merely a 
limited representative of material wealth. Money, in 
its capacity of a universal equivalent, appears, as we have 
seen, as a member of an equation, the other member of 
which consists of an endless series of commodities. It 
depends on the magnitude of the exchange value to 
what extent money will be realized in such an endless 
series, i. e., to what degree it corresponds to the con 
ception of it as an exchange value. The automatic 
movement of exchange value as exchange value can only 
tend to its passing beyond its quantitative limits. But 
by exceeding the quantitative limits of the hoard a new 
limit is created which must be removed in its turn. 
There is no definite limit which appears as a barrier to 
further hoarding, every limit plays that part. Hoard 
accumulation has, therefore, no inherent limits, no in 
herent measure; it is an endless process which finds in 
each successive result an impulse for a new beginning. 
While the hoard is increased only by being preserved, 
it is preserved only by being increased. 

Money is not only an object of the passion for riches ; 
it is the object of that passion. The latter is essentially 
auri sacra fames. The passion for riches, contrary to 
that for special kinds of natural wealth or use-values, 
such as clothing, ornaments, herds, etc., is possible only 
when universal wealth has been individualized as such 
in a particular object and can, therefore, be retained in 
the form of a single commodity. Money appears then 
no less as an object than as a source of the passion for 


riches. 1 The underlying fact of the matter is that ex 
change value as such and with it its increase become 
the final aim. Greed holds the hoard fast by not allow 
ing the money to become a medium of circulation, but 
the thirst for gold saves the money soul of the hoard by 
keeping up the lasting affinity of gold for circulation. 

To sum up, the activity by which hoards are built up 
resolves itself into withdrawal of money from circula 
tion by continually repeated sales, and simple hoarding 
or accumulation. In fact, it is only in the sphere of 
simple circulation and, especially, in the form of hoard 
ing, that accumulation of wealth as such takes place, 
while, as we shall see later, in the case of other so-called 
forms of accumulation it is only a misnomer to call them 
by that name in mere recollection of the simple accu 
mulation of money. All other commodities are hoarded 
either as use-values, in which case the manner of storing 
them up is determined by the peculiarities of their use- 
value : the storing of grain, e. g., requires special equip 
ment ; the accumulation of sheep makes one a shepherd ; 
the accumulation of slaves and land creates relations 
of master and servant, etc.; the accumulation of par 
ticular kinds of wealth requires special processes differ 
ent from the simple act of hoarding, and develops spe 
cial individual traits. Or, wealth in the form of com- 

*"A nummo prima origo avaritiae . . . haec paulatim 
exarsit rabie quadam, non jam avaritia, sed fames auris." 
(Plin., Hist. Nat., 1. XXXIII., c. XIV.) 

("From money first springs avarice ... the latter 
gradually grows into a kind of madness, which is no more 
avarice, but a thirst for gold.") 


iiKxlities is hoarded as exchange-value and in that case 
hoarding appears as a commercial or a specific economic 
operation. The one who carries on such operations be 
comes a dealer in corn, in cattle, etc. Gold and silver 
ure money not through some activity of the individual 
who accumulates it, but as crystals of the process of 
circulation which goes on without any aid on his part. 
He has nothing to do but to put them aside, adding 
new weights of metal to his hoard, a perfectly sense 
less operation which, if applied to all other commodities, 
would deprive them of all value. 1 

Our hoarder appears as a martyr of exchange value, 
a holy ascetic crowning the metal pillar. He cares for 
wealth only in its social form and therefore he buries 

1 Horace thus understands nothing of the philosophy of 
hoarding when he says (Satir. 1. 11., ISatir. Ill) : Siquia 
t-mat citharas, emptas coinportut in unuin, Nee studio citharae 
nee musae deditus ulli; Si scalpra et formas non sutor; nautica 
vela A versus mercaturis; delirus et amens, Undique dicatur 
inerito. Qui discrepat istis, Qui nummos aurunque recondit 
nescius uti Compositis metuensque velut contingere sacrum ?" 
"If one buys fiddles, hoards them up when bought. 
Though music s study ne er engaged his thought, 
One lasts and awls, unversed in cobbler s craft, 
One sails for ships, not knowing fore from aft, 
You d call them mad: but tell me, if you please, 
How that man s case is different from these, 
Who as he gets it, stows away his gain, 
And thinks to touch a farthing were profane?" 
(Transl. by John Covington, London, 1874, p. 60.) 
Mr. Senior understands the question much better: "L argent 
paratt etre la seule chose dont le dsir est universel, et il en 


it away from society. He wants to have the commodity 
in the form in which it is always capable of entering 
circulation and therefore he withdraws it from circula 
tion. He dreams of exchange value and therefore does 
not exchange. The fluid form of wealth and its petri- 
fication, the elixir of life and the stone of wisdom madly 
haunt each other in alchemic fashion. In his imagi 
nary unlimited passion for enjoyment he denies himself 
all enjoyment. Because he wishes to satisfy all social 
wants, he barely satisfies his elementary natural wants. 
While holding fast to his wealth in its metallic bodily 
form, the latter escapes him as a phantom. As a matter of 
fact, however, the hoarding of money for the sake of 
money is the barbaric form of production for produc 
tion s sake, i. e., the development of the productive 
forces of social labor beyond the limits of ordinary wants. 
The less the production of commodities is developed, 
the more important is the first crystallization of ex 
change value into money, or hoarding, which plays, 
therefore, an important part among the ancient nations. 

est ainsi parceque Pargent eat une richesse obstraite et parcque 
les homines, en la posse"dant peuvent satisfaire a tous leur be 
soms de quelque nature qu ils soient." ("Principea Fondamen- 
taux de 1 Economie Politique, tirs de lecons edites et inedites de 
N. W. Senior, par Comte Jean Arrivabene," Paris, 1836, p. 221. 
(The corresponding passage in the English edition of his Politi 
cal Economy, London, 1863, is to be found on p. 27. Trans 
lator.) So does Storch : "Since money represents all other 
forms of wealth, it is only necessary to accumulate it to pro 
vide for oneself all kinds of wealth existing in the world." (1. 
c.. v. 2, p. 134.) 


in Asia until the present day, and among modern agri 
cultural nations where exchange value has not as yet 
taken hold of all the relations of production. Before 
taking up the consideration of the specific economic 
function of hoarding within the sphere of metallic cir 
culation, let us mention another form of hoarding. 

Quite apart from their aesthetic properties, silver and 
gold commodities are convertible into money, since the 
material of which they are made is a money material; 
and, inversely, gold money and gold bullion can be con 
verted into commodities. Because gold and silver con 
stitute the material of abstract wealth, the greatest dis 
play of wealth consists of the utilization of these metals 
as concrete use-values, and if the owner of commodities 
hides his treasure at certain stages of production, he is 
very anxious to appear before other owners of commod 
ities as rico hombre whenever he can do so with safety. 
He gilds himself and his house. 1 Tn Asia, especially in 
India, Avhere, unlike under the capitalist system, the 
hoarding of wealth appears not as a subordinate func 
tion of the system of production, but as an end in itself, 
gold and silver commodities are practically but aesthetic 
forms of hoards. In mediaeval England gold and silver 
commodities were considered before the law as mero 
forms of treasure, since their value was but slightly in- 

1 To what extent the inner man of the commodity owner re 
mains unchanged, even when he has become civilized and haa 
developed into a capitalist, is shown hy the example of a Lon 
don representative of a cosmopolitan banking house who adopted 
as a fitting coat of arms for his family a 100,000 bank note, 
which he had hung up in a glass frame. The point here is in 
the mocking contempt of the note for circulation. 


creased by the crude labor spent upon them. They were 
destined to re-enter circulation and their fineness was 
therefore prescribed in the same manner as that of 
coin. The increasing use of gold and silver as objects 
of luxury with the growth of wealth is such a simple 
matter that it was perfectly clear to the ancients, 1 while 
modern economists have advanced the erroneous prop 
osition that the use of silver and gold articles increases 
not in proportion to the growth of wealth, but in pro 
portion to the fall in value of the precious metals. Their 
otherwise accurate references to the use of Californian 
and Australian gold are inconclusive, since the increased 
consumption of gold as a raw material does not find 
justification, according to their theory, in any corre 
sponding decline in its value. From 1810 to 1830, in 
consequence of the struggle of the American colonies 
against Spain and the interruption of mining caused by 
revolutions, the annual average production of precious 
metals declined by more than one-half. The decline 
of coin in circulation in Europe amounted to nearly one- 
sixth, comparing the years 1829 and 1809. Although 
the quantity produced had thus declined and the cost 
of production, if it had changed at all, had increased, 
yet the consumption of precious metals as objects of 
luxury increased to an extraordinary extent in England 
during the very war and on the continent after the 
Peace of Paris. The consumption increased with the 
general growth of wealth. 2 It may be stated as a gen 
eral law that the conversion of gold and silver money 

1 See the passage from Xenophon, quoted below. 
* Jacob, 1. c., v. 2, ch. 25 and 26. 

into articles of luxury prevails in times of peace, while 
their reconversion into bullion or even coin takes place 
in stormy periods. 1 How considerable the proportion 
is of the gold and silver treasure in the form of articles 
of luxury to the quantity of precious metals serving as 
money may be seen from the fact that in 1829 the pro 
portion in England, according to Jacob, was two to one, 
and in entire Europe and America the precious metals 
in the form of articles of luxury exceeded those in the 
form of money by one-fourth. 

We have seen that the circulation of money is but 
the manifestation of the metamorphoses of commodities, 
or of the form under which the social interchange of 
matter takes place. With the change in the total price 
of commodities in circulation or in the volume of their 
simultaneous metamorphoses, the rapidity of their change 
of form in each case being given, the total quantity of 
gold in circulation must always expand or contract. 
That is possible only under the condition that the total 
quantity of money in the country continually bear a vary 
ing ratio to the quantity of money in circulation. This 
condition is met by the process of hoarding. With a 
fall in prices or rise in the rapidity of circulation, the 
hoard-reservoirs absorb that part of money which is 
thrown out of circulation ; with a rise in price or a de- 

1 "In times of great agitation and insecurity, especially dur 
ing internal commotions or invasions, gold and silver articles 
are rapidly converted into money ; whilst during periods of 
tranquility and prosperity, money is converted into plate anJ 
jewelry." (1. c., v. 2, p. 357.) 


cline in the rapidity of circulation, the hoards open up 
and return a part of their contents to the stream of 
circulation. The solidification of circulating money 
into hoards and the outpouring of hoards into circula 
tion is a constantly oscillating movement in which the 
prevalence of the one or the other tendency is deter 
mined exclusively by fluctuations in the circulation of 
commodities. Hoards thus serve as conduits for the 
supply and withdrawal of money to or from circulation, 
so that every time only that quantity of money circu 
lates as coin which is required by the immediate needs 
of circulation. If the volume of the entire circula 
tion suddenly expands and the fluent unity of sale and 
purchase assumes such dimensions that the total sum of 
prices to be realized increases more rapidly than the 
rapidity of the circulation of money, the hoards decrease 
perceptibly; but when the combined movement slackens 
to an unusual extent, or the movement of buying and 
selling steadies itself, the medium of circulation solidi 
fies into money in large measure, and the treasure reser 
voirs fill up far above their average level. In countries 
with an exclusively metallic circulation or where pro 
duction is at a low stage of development, the hoards are 
endlessly split up and scattered all over the land, while 
in countries where the capitalist system is developed 
they are concentrated in bank reservoirs. Hoards are 
not to be confounded with coin reservoirs, which 
form a constituent part of the total supply of 
money in circulation, while the interaction between 
hoards and currency implies the decline or rise of its 
total supply. Gold and silver commodities form, as we 


have seen, both conduits for the withdrawal of precious 
metals, as well as sources of their supply. In ordinary 
times only their former function is of importance to 
the economy of metallic circulation. 1 

1 In the following passage Xenophon develops money in its 
specific forms of money and hoard : "iv ^ovu TOVTM &v iy!a oUa lp- 

yuv ovS e </>0ovei ouoYiv TOIS e7ri<rcevao/ie Ois-. -a.pyvpi.Tii; Si oa<f av Tt \fiiav ^xuVij- 
rat, Kai apyvpiov irAetov yiyvijToi, rotrovria TrAetove? CTTI TO tpyov TOVTO fp^oyrai.... 
Kai yap &r) frrnr\a. /xei/ ttrecidr ixavd Tt$ Tijcr>)Tai rrj oixia, oil fiaAa en irpoaia- 
VOVVTO.I apyvpiov &e ovei9 iru ovrut iroAu fKTrjvaro u><TT fii) en TrpotrOtiaBai, aAA 
TJP TIO-I yeVrjTai jrajiTrA^Ses, TO irfpiTTfvov KaTOpuTTOVTe? ovSiv ^TTOK JjSorrai fj 
Xp<u^t"0i aiiTcu- coi /Ar|f OTaf ye ej TrpaTTtuo-if ai TrdAeis io-jfvpis, oi arSpwrroi ip- 
yvpiou JC OITOI- Oi ftei yap avSpf<; afi<)>i oirAa Tt xaAa xal ijrirou? ayaBovs ai ot- 
icias Kat JCarcuriCfvas jieyaAon-pcn-ers /3ouAoi / rai Sawafai , ote yvvaiicts is o-fr^T 
jroAvTeAq /cai ^puo oDi Koap-ov TpcVofTai OTav 6e au voo~>j<ru)<7i TroAcis >j a^optat 
tcapirui 17 iro\ffjiif Ti Kai iroAii fxaAAoK T^? yjjs apyou yiyvo^ien)? <cai ts eirtTi)eia 
<cal ct <jricoupou9 ^Ofti<r/iaTO eoin-ai." ( Xen. de Vectigalibus, C. IV.) 

("Of all operations with which I am acquainted, this is the 
only one in which no sort of jealousy is felt at a further devel 
opment of the industry . . . the larger the quantity of ore 
discovered and the greater the amount of silver extracted, the 
grenter the number of persons ready to engage in the opera 
tion . . . No one when he has got sufficient furniture for 
his house dreams of making further purchases on this head, 
but of silver no one ever yet possessed so much that he was 
forced to cry "Enough." On the contrary, if ever anybody 
does become possessed of an immoderate amount he finds as 
much pleasure in digging a hole in the ground and hoarding it 
as an actual employment of it ... When a state is pros 
perous there is nothing which people so much desire as silver. 
The men want money to expend on beautiful armor and tine 
horses, and houses and sumptuous paraphernalia of all sorts. 
The women betake themselves to expensive apparel and orna 
ments of gold. Or when states are sick, either through barren 
ness of corn and other fruits, or through war, the demand for 
current coin is even more imperative (whilst the ground lies 
unproductive), to pay for necessaries or military aid." (Transl. 
by H. G. Dakyns, London, 185)2, v. 2, Revenues, p. 335-3, Mi.) 
Aristotle develops in Hook 1., ch. !) of his Politics the two 
opposite movements of circulation, C-M-0 and M-C-M, calling 
them "economics" and "chrematistics" respectively. The two 
forms are represented by the (Jreek tragedian Euripides as 
Sikn (right) and Keodos (profit). 



The two forms which have so far distinguished money 
from the circulating medium are those of suspended coin 
and of the hoard. The temporary transformation of coin 
into money in the case of the former means that 
the second phase of C M C, namely purchase 
M C, must break up within a certain sphere of 
circulation into a series of successive purchases. As 
to hoarding, it is simply based on the isolation of the 
act C M when it does not immediately pass into M C, 
or is but an independent development of the first meta 
morphosis of a commodity; it represents money as the 
result of the alienation of all commodities in contra 
distinction to the medium of circulation as the embodi 
ment of commodities in their always alienable form. 
Coin reserves and hoards are money only as non-circulat 
ing mediums and are non-circulating mediums only be 
cause they do not circulate. In the capacity in which 
we consider money now, it circulates or enters circula 
tion, but does not perform the function of a circulating 
medium. As a medium of circulation money is always 
a means of purchase, now it does not act in that capacity. 

As soon as money develops through the process of 
hoarding into the embodiment of abstract social wealth 
and the tangible representative of material wealth, it 
assumes in that capacity special functions within the 
process of circulation. If money circulates merely as a 
medium of circulation and therefore as a means of 
purchase, it is understood that commodity and money 
confront each other at the same time, i. e., that the same 


value is present in a double form: at one pole, as a 
commodity in the hands of the seller; at the other 
pole as money in the hands of the buyer. This sim 
ultaneous existence of the two equivalents at opposite 
poles and their simultaneous change of places or mu 
tual alienation presupposes in its turn that seller and 
buyer enter into relations as owners of equivalents 
that are on hand. But in the course of time, the 
process of the metamorphosis of commodities which 
produces the different forms of money, transforms 
also the owners of commodities or changes the char 
acter in which they appear before each other in the 
community. In the process of metamorphosis of the 
commodity the gT-iardian of the latter changes his skin 
as often as the commodity changes place or as the 
money assumes new forms. Thus, the owners of 
commodities originally confronted each other only as 
commodity owners, but later on they became one a 
buyer, the other a seller ; then each became alternately 
buyer and seller, then hoarders, and finally rich men. 
In that manner, the owners of commodities do not 
come out of the process of circulation the same men 
that they entered. Tn fact the different forms which 
money assumes in the process of circulation are but 
crystallized changes of form of the commodities 
themselves, which in their turn are but concrete ex 
pressions of the changing social relations in which 
commodity owners carry on the interchange of matter 
with one another. New trade relations spring up in 
the process of circulation, and, as representatives of 
these changed relations, commodity owners assume 
new economic roles. Just as gold becomes idealized 


within the process of circulation and plain paper, in 
its capacity of a representative of gold, performs the 
function of money, so does the same process of cir 
culation lend the weight of actual seller and buyer 
to the buyer and seller who enter it merely as repre 
sentatives of future money and future commodities. 
All the forms in which gold develops into money, 
are but the unfolding of potentialities which the 
metamorphosis of commodities bears within itself. 
These forms did not become distinctly differentiated 
in the process of simple money circulation where 
money appears as coin and the movement C M C 
forms a dynamic unity : at most, they appeared as 
mere potentialities as, e. g., in the case of the break 
in the metamorphosis of a commodity. We have 
seen that in the process C M the relations between 
the commodity and money were those of an actual 
use-value and ideal exchange-value to an actual ex 
change value and only ideal use-value. By alienating 
his commodity as a use-value the seller realized its 
own exchange value and the use-value of money. On 
the contrary, the buyer, by alienating his money as 
exchange value, realized its own use-value and the 
price of the commodity. Commodity and money 
changed places accordingly. When it comes to a real 
ization in actual life of this bi-polar contrast, a new 
break occurs. The seller actually alienates his com 
modity, but realizes its price only in idea : he has sold 
his commodity at its price, which is to be realized, 
however, only subsequently, at a time agreed upon. 
The purchaser buys as the representative of future 
money, while the vender sells as the owner of present 


goods. On the part of the vender, the commodity 
as use-value is actually alienated, without the price 
being actually realized ; on the part of the purchaser, 
money is actually realized in the use-value of the 
commodity, without being- actually alienated as ex 
change value. Instead of a token of value repre 
senting money symbolically as was the case before, 
the purchaser himself performs that part now. And 
just as in the former case the symbolic nature of the 
token of value called forth the guarantee of the state 
which has made it legal tender, so does the personal 
symbolism of the buyer bring about legally enforcible 
private contracts among commodity owners. 

The contrary may happen in the process M C, 
where the money can be alienated as a real means of 
purchase, and in that way the price of the commodity 
can be realized before the use-value of the money is 
realized and the commodity actually delivered. This 
occurs constantly under the everyday form of pre 
payments. And it is under this form that the English 
government purchases opium from the ryots of India, 
or, foreign merchants residing in Russia mostly buy 
agricultural products. In these cases, however, the 
money always acts in its well known role of a means 
of purchase and therefore, does not assume any new 
forms. 1 We need not dwell, therefore, on this case 
any longer ; but with reference to the changed form 
which the two processes M C and C M assume 

Of course, capital also is advanced in the shape of money, 
and the money thus advanced may be advanced capital, hut 
this point of view does not fall within the horizon of simple 


now, we may note that the difference between pur 
chase and sale which appeared but imaginary in the 
direct process of circulation, now becomes a real dif 
ference, since in the former case only the money is 
present and in the latter only the commodity, and in 
either case only that extreme is present from which 
the initiative comes. Besides, the two forms have 
this in common : that in either, one of the equivalents 
is present only in the common will of the buyer and 
seller, a will that is binding on both and assumes 
definite legal forms. 

Seller and buyer become creditor and debtor. 
While the commodity owner looked comical as the 
guardian of a treasure, he now becomes awe-inspir 
ing, since he no longer identifies himself but his neigh 
bor with a certain sum of money and makes him and 
not himself a martyr of exchange value. From a be 
liever he becomes a creditor, for religion he substi 
tutes law. 

"I stay here on my bond !" 

Thus, in the modified form C M in which the 
commodity is present and money is only represented, 
money plays first of all the part of a measure of 
value. The exchange value of the commodity is esti 
mated in money as its measure; but as exchange 
value, established by contract, price exists not only 
in the mind of the seller, but also as a measure of 
obligation on the part of the buyer. Besides serving 
as a measure of value, money plays here the part of 
a means of purchase, although in that capacity it only 
casts ahead the shadow of its future existence. It 
attracts the commodity from its position in the hand 


of the seller into that of the buyer. As soon as the 
term of the contract expires, money enters circula 
tion, since it changes its position by passing from the 
hands of the former buyer into those of the former 
seller. But it does not enter circulation as a circu 
lating medium or as a means of purchase. It per 
formed those functions before it was present and 
it appears after it has ceased to perform them. It 
now enters circulation as the only adequate equivalent 
of the commodity, as the absolute form of existence 
of exchange value, as the last word of the process of 
exchange, in short as money, and money in its distinct 
role of a universal means of payment. In this ca 
pacity of a means of payment money appears as the 
absolute commodity, but within the sphere of circu 
lation and not without it as was the case with hoards. 
The difference between the means of purchase and the 
means of payment makes itself unpleasantly felt in 
periods of commercial crises. 1 

Originally, the conversion of the product into 
money in the sphere of circulation appears only as 
an individual necessity for the commodity owner in 
so far as his own product has no use-value to him. 
but has to acquire it first by being alienated. But in 
order to pay at the expiration of the contract, he 
must have sold commodities (before that. Thus, en 
tirely apart from his individual wants, the movement 
of the circulation process makes selling a social neces 
sity with every owner of commodities. As a former 

"The difference between the means of purchase and the 
means of payment is emphasized by Luther. 


buyer of a commodity he is compelled to become a 
seller of another commodity in order to get money 
not as a means of purchase but as a means of pay 
ment, as the absolute form of exchange value. The 
conversion of commodity into money as a final act, 
or the first metamorphosis of a commodity as an end 
in itself which in the case of hoarding seemed to be 
a matter of caprice on the part of the commodity 
owner, becomes now an economic function. The mo 
tive and essence of sale for the sake of payment be 
comes from a mere form of the process of circulation 
its self emanating substance. 

In this form of sale the commodity completes its 
change of position ; it circulates while it postpones its 
first metamorphosis, viz. its transformation into 
money. On the contrary, on the part of the buyer 
the second metamorphosis is completed, i. e. money 
is reconverted into a commodity before the first meta 
morphosis has taken place, i. e., before the com 
modity has been turned into money. The first meta 
morphosis thus takes place after the second in point 
of time ; and thereby, money i. e. the form of the com 
modity in its first metamorphosis, acquires a new 
destination. Money or the spontaneous development of 
exchange value, is no longer a mere intermediary form 
of the circulation of commodities, but its final result. 

That such time sales in which the two poles of the 
sale are separated in point of time, have their natural 
origin in the simple circulation of commodities, re 
quires no elaborate proof. In the first place, the de 
velopment of circulation leads to a continual repeti- 


tion of the mutual transactions between the same 
commodity owners who confront each other as seller 
and buyer. The repetition is not accidental ; on the 
contrary, goods are ordered, let us say, for a certain 
date in the future when they are to be delivered and 
paid for. In that case the sale is ideal, i. e. it is 
legally accomplished without the actual presence of 
the goods and money. Both forms of money, those 
of a medium of circulation and of a means of pay 
ment still coincide here, since in the first place, com 
modity and money change places simultaneously, and 
secondly, the money does not buy the commodity, but 
realizes the price of the commodity purchased be 
fore. In the second place, the nature of a great many 
use-values makes the simultaneous alienation and de 
livery of the goods impossible, and delivery has to 
be postponed for a certain time; e. g., when the use 
of a house is sold for one month, the use-value of 
the house is delivered only at the expiration of the 
month, although it changes hands at the beginning of 
the month. Since the actual transfer of the use- 
value and its virtual alienation are separated here in 
point of time, the realization of its price occurs also 
atfer its change of place. Finally, the difference in 
the seasons and in the length of time required for the 
production of various commodities brings about a 
situation where one tries to sell his goods, while the 
other is not ready to buy ; and with the repeated pur 
chases and sales between the same commodity owners 
the two ends of sale fall apart according to the con 
ditions of production of the respective commodities. 
Thus arises a relation of creditor and debtor between 


the owners of commodities which, though constituting 
the natural foundation of the credit system, may be 
fully developed before the latter comes into existence. 
It is clear that with the extension of the credit system, 
and, consequently, with the development of the 
capitalist system of production in general, the func 
tion of money as a means of payment will extend at 
the expense of its function as a means of purchase 
and, still more, as an element of hoarding. In Eng 
land, e. g., money as coin has been almost completely 
banished into the sphere of retail and petty trade be 
tween producers and consumers, while it dominates 
the sphere of large commercial transactions as a 
means of payment. 1 

As the universal means of payment money becomes 
the universal commodity of all contracts, at first only in 

Mr. MacLeod, in spite of his doctrinaire conceit about defi 
nitions, fails so utterly to grasp the most elementary econom 
ic relations that he tries to deduce the very origin of money 
from its crowning form, viz., that of a means of payment. He 
says among other things that since people do not always need 
each other s services at the same time, and not to the same 
extent, "there would remain over a certain difference or 
amount of service due from the first to the second debt." 
The owner of this debt needs the services of a third person, 
who does not directly need those of the second, and "transfers 
to the third the debt dut to him from the first. Evidence of 
debts changes so hands currency. . . . When a person 
received an obligation expressed by metallic currency, he is 
able to command the services not only of the original debtor, 
but of the whole of the industrious community." (MacLeod, 
"Theory and Practice of Banking," etc., London, 1855, v. I., 
ch. I.) 

- 194 

the sphere of circulation of commodities. 1 But with the 
development of this function of money, all other forms 
of payment are gradually converted into money pay 
ments. The extent to which money is developed as the 
exclusive means of payment indicates the degree to; 
whicli exchange value has taken hold of production in 
its depth and breadth. 2 

The volume of money in circulation, as a means of 
payment, is determined in the first place, by the amount 
of payments, i. e. by the sum total of the prices of the 
commodities alienated, but not about to be alienated, as 

Bailey, 1. c., p. 3. "Money is the general commodity of 
contracts, or that in which the majority of bargains about 
property, to be completed at a future time, are made." 

3 Says Senior (in his Lectures, published by Comte Arriva- 
bene, 1. c., p. 117) : "Since the value of everything changes 
within a certain period of time, people select as a means of pay 
ment an article whose value changes least and which retains 
longest a given average ability to buy things. Thus, money be 
comes the expression or representative of values." On the con 
trary: just because gold, silver, etc., have become money, i. e.. 
the embodiment of independently existing exchange value, they 
become the universal means of payment. When the considera 
tion as to the stability of the value of money mentioned by Mr. 
Senior comes into play, i. e., in periods when money asserts it 
self as the universal means of payment through the force of 
circumstances, then is just the time when fluctuations in the 
value of money are discovered. Such was the time of Elizabeth 
in England, when Lord Burleigh and Sir Thomas Smith, in 
view of the manifest depreciation of the precious metals, pul 
through an act of parliament which obliged the universities of 
Oxford and Cambridge to stipulate the payment of one-third of 
their ground rents in wheat and malt. 

< 195 

in the case of the simple circulation of money. The 
quantity thus determined is subject, however, to two 
modifications. The first modification is due to the 
rapidity with which the same piece of money repeats 
the same function, i. e. with which the several pay 
ments succeed one another. A pays B, whereupon B 
pays C, and so forth. The rapidity with which the 
same coin repeats its function as a means of payment, 
depends first, upon the continuity of the relation of 
creditor and debtor among the owners of commodi 
ties, the same commodity owner being the creditor 
of one person and the debtor of another, etc., and 
secondly, upon the interval which separates the times 
of various payments. This chain of payments or of 
supplementary first metamorphoses of commodities is 
qualitatively different from the chain of metamor 
phoses which is formed by the circulation of money 
as a circulating medium. The latter not only makes 
its appearance gradually, but is even formed in that 
manner. A commodity is first converted into money, 
then again into a commodity, thereby enabling 
another commodity to become money, etc. ; or, seller 
becomes buyer, whereby another commodity owner 
turns seller. This successive connection is accident 
ally formed in the very process of the exchange of 
commodities. But when the money which A has paid 
to B is passed on from B to C, from C to D, etc., 
and that, too, at intervals rapidly succeeding one 
another, then this external connection reveals but an 
already existing social connection. The same money 
passes through different hands not because it appears 
as a means of payment ; it passes as a means of pay- 


ment because the different hands have already 
clasped each other. The rapidity with which money 
circulates as a means of payment thus shows that in 
dividuals have been drawn into the process of circu 
lation much deeper than would be indicated by the 
same rapidity of the circulation of money as coin or 
as a means of purchase. 

The sum total of prices made up by all the pur 
chases and sales taking place at the same time, and, 
therefore, side by side, constitutes the limit for the 
substitution of the volume of coin by the rapidity of 
its circulation. If the payments that are to be made 
simultaneously are concentrated at one place which 
naturally arises at first at points where the circulation 
of commodities is largest the payments balance each 
other as negative and positive quantities : A is under 
obligations to pay B, while he has to be paid by C, 
etc. The quantity of money required as a means of 
payment will, therefore, be determined not by the 
total amount of payments which have to be made sim 
ultaneously, but by the greater or less concentration 
of the same and by the magnitude of the balance re 
maining after their mutual neutralization as negative 
and positive quantities. Special arrangements are 
made for settlements of this kind even where the 
credit system is not developed at all. as was the case 
e. g. in ancient Rome. The consideration of these 
arrangements, however, as well as that of the general 
time limits of payment, which are everywhere estab 
lished among certain elements in the community, does 
not belong here. We may add that the specific in 
fluence which these time settlements exert on the 


periodic fluctuations in the quantity of money in cir 
culation, has been scientifically investigated but lately. 
In so far as the payments mutually balance as posi 
tive and negative quantities, no money actually ap 
pears on the scene. It figures here only in its ca 
pacity of a measure of value: first, in the prices of 
commodities, and second, in the magnitude of mutual 
obligations. Aside from its ideal form, exchange 
value does not exist here independently, not even in 
the form of a token of value; that is to say, money 
plays here only the part of ideal money of account. 
The function of money as a means of payment thus 
implies a contradiction. On the one hand, in so far 
as payments balance, it serves only ideally as a meas 
ure of value. On the other hand, in so far as a pay 
ment has actually to be made, money enters circula 
tion not as a transient circulating medium, but as the 
final resting form of the universal equivalent, as the 
absolute commodity, in a word, as money. There 
fore, whenever such a thing as a chain of payments 
and an artificial system of settling them, is developed, 
money suddenly changes its visionary nebulous shape 
as a measure of value, turning into hard cash or 
means of payment, as soon as some shock causes a 
violent interruption of the flow of payments and dis 
turbs the mechanism of their settlement. Thus, under 
conditions of fully developed capitalist production, 
where the commodity owner has long become a capit 
alist, knows his Adam Smith, and condescendingly 
laughs at the superstition that gold and silver alone 
constitute money or that money differs at all from 
other commodities as the absolute commodity, money 


suddenly reappears not as a medium of circulation, 
but as the only adequate form of exchange value, as 
the only form of wealth, exactly as it is looked upon 
by the hoarder. In its capacity of such an exclusive 
form of wealth, it reveals itself, unlike under the 
monetary system, not in mere imaginary, but in actual 
depreciation and worthlessness of all material wealth. 
That is what constitutes the particular phase of crises 
of the world market which is known as a money crisis. 
The summum bonum for which everybody is crying 
at such times as for the only form of wealth, is cash, 
hard cash ; and by the side of it all other commodities 
just because they are use-values, appear useless like 
so many trifles and toys, or, as our Dr. Martin Luther 
says, as mere objects of ornament and gluttony. This 
sudden reversion from a system of credit to a system 
of hard cash heaps theoretical fright on top of the 
practical panic ; and the dealers by whose agency cir 
culation is affected shudder before the impenetrable 
mystery in which their own economical relations are 
involved. 1 

Payments, in their turn, require the formation of 
Boisguillebort, who would stem the development of bour 
geois relations of production and violently attacks the bour 
geois personally, has a soft heart for those forms ol money in 
which it appears only ideally or transiently. Thus ne speaks 
first of the medium of circulation and next of the means of 
payment. What he does not see is the direct transition of 
money from its ideal to the material form, since the hard 
cash is latently present in the ideal measure of value. That 
money is but another form of commodities, he says, is shown 
by wholesale trade, in which exchange takes place without 
the intervention of money, after "les marchandises sont a,p- 
("Le Detail de la France," 1, , p, 10.) 



reserve funds, the accumulation of money as a means 
of payment. The building up of reserve funds ap 
pears no longer as a practice carried on outside of 
the sphere of circulation, as in the case of hoarding; 
nor as a mere technical accumulation of coin, as in 
the case of coin reserves ; on the contrary, money 
must now be gradually accumulated to be available 
on certain future dates when payments become due. 
While hoarding, in its abstract form as a means of 
enrichment, declines with the development of the 
capitalist system of production, that species of hoard 
ing which is directly called for by the process of pro 
duction, increases ; or, to put it differently, a part of 
the treasure which is generally formed in the sphere 
of circulation of commodities, is absorbed as a re 
serve fund of means of payment. The more de 
veloped the capitalist system of production, the more 
these reserve funds are limited to the necessary mini 
mum. Locke, in his work "On the Lowering of In 
terest" 1 furnishes interesting data with reference to 
the size of these reserve funds in his time. They 
show what a considerable part of the total money in 
circulation the reservoirs for means of payment ab 
sorbed in England just at the time when banking be 
gan to develop. 

The law as to quantity of money in circulation, as 
it has been formulated in the analysis of the simple 
circulation of money, receives an essential modifica 
tion when the circulation of the means of payment is 
taken into account. The rapidity of the circulation of 
money whether as circulating medium or as means of 

Locke, I. c., D. 17. 18. 


payment being given, the total amount of money in 
circulation at a given time will be determined by the 
sum total of the prices of commodities to be realized, 
phis the total amount of payments falling due at the 
same time, minus the amount of payments balancing 
each other. The general law that the volume of 
money in circulation depends on the prices of com 
modities is not affected by this in the least, since the 
extent of the payments is itself determined by the 
prices stipulated in contracts. What is, however, 
y.trikingly demonstrated, is that even if the rapidity of 
circulation and the economy of payments be assumed 
to remain the same, the sum total of the prices of 
the commodities circulating in a given period of time, 
say one day, and the volume of money in circulation 
on the same day are by no means equal, because there 
is a large number of commodities in circulation whose 
prices have yet to be realized in money at a future 
date, and there is a quantity of money in circulation 
which constitutes the payment for commodities which 
have long gone out of circulation. The latter amount 
will depend on the sum of payments falling due on 
fhe same day although contracted for at entirely dif 
ferent periods. 

We have seen that a change in the values of gold 
and silver does not affect their function as measures 
of value or money of account. But this change is of 
decisive importance for money as a hoard, since with 
the rise or fall of value of gold and silver, the total 
value of a gold or silver hoard will also rise or fall. 
Of still greater importance is the effect of this change 
on money as a means of payment. The payment takes 


place after the sale of the commodity, or the money 
serves in two different capacities at two different pe 
riods ; first, as a measure of value, then as a means 
of payment corresponding to the measurement. If, 
during- this interval, the value of the precious metals 
or the labor-time necessary for their production un 
dergoes a change, the same quantity of gold or silver 
will be worth more or less when it appears as a means 
of payment than what it was when it served as a 
measure of value, i. e., when the contract was con 
cluded. The function of a particular commodity, 
like gold or silver, to serve as money or independent 
exchange value comes here in conflict with the nature 
of the particular commodity whose magnitude of 
value depends on changes in the cost of its produc 
tion. The great social revolution which caused the 
fall in value of the precious metals in Europe, is as 
well known as the revolution of an opposite character 
which had been brought about at an early period in 
the history of the ancient Roman republic by the rise 
in value of copper in terms of which the debts of the 
plebeians had been contracted. Without attempting 
here to follow any further the fluctuations of value 
of the precious metals and their effect on the system 
of bourgeois political economy, it is at once apparent 
that a fall in the value of the precious metals favors 
the debtors at the expense of the creditors, while a 
rise in their value favors the creditors at the expense 
of the debtors. 


Gold becomes money as distinguished from coin only 
after it is withdrawn from circulation in the shape of 


a hoard ; it then enters circulation as a non-medium of 
circulation, and finally breaks through the barriers of 
home circulation to assume the part of a universal equiv 
alent in the world of commodities. It becomes world 

While the general measures of weight of the precious 
metals served as their original measures of value, the re 
verse process takes place now in the world market, and 
the reckoning names of money are turned back into cor 
responding weight names. In the same way, while 
shapeless crude metal (aes rude) was the original 
form of the medium of circulation and the coin form 
constituted but the official stamp certifying that a given 
piece of metal was of a certain weight, now the precious 
metal in its capacity of a world coin throws off its stamp 
and shape and reassumes the indistinguishable bullion 
form; and even if national coins, such as Russian im 
perials, Mexican dollars, and English sovereigns, do cir 
culate abroad, their name is of no importance, and only 
their contents count. Finally, as international money, 
the precious metals come again to perform their original 
function of mediums of exchange, which, like the exr 
change of commodities, arose first not within the 
various primitive communities, but at their points ol 
contact with one another. As world money, money thm 
reassumes its primitive form. On leaving the sphero 
of home circulation, it strips off the particular form* 
which it has acquired in the course of the development of 
the process of exchange within that particular national 
sphere, those local garbs of standard of price, of coin, 
of auxiliary coin, and of token of value. 


We have seen that in the home circulation of a coun 
try, only one commodity serves as a measure of value. 
Since, however, that function is performed by gold in. 
some countries and by silver in others, there is a double 
standard of value in the world market and money as 
sumes two forms in all its other functions. The transla 
tion of the values of commodities from gold prices into 
silver prices and vice versa depends in each case upon 
the relative value of the two metals, which is constantly 
changing and, therefore, appears to be constantly in the 
process of determination. Commodity owners in every 
national sphere of circulation have to use gold and silver 
alternately for foreign circulation and thus to exchange 
the metal which is accepted as money at home for the 
metal which they happen to need as money abroad. 
Every nation is, therefore, utilizing both metals, gold 
and silver, as world money. 

In the international circulation of commodities, gold 
and silver appear not as mediums of circulation, but as 
universal mediums of exchange. The universal medium 
of exchange performs its function only under its two 
developed forms of a means of purchase and of a means 
of payment, whose mutual relation in the world market 
is the very reverse of what it is at home. In the sphere 
of home circulation, money in the form of coin, played 
exclusively the part of a means of purchase, either as the 
intermediary in the dynamic unity C M C or as the 
representative of the transient form of exchange value in 
the unceasing change of positions by commodities. In 
the world market it is just the contrary. Gold and sil 
ver appear here as a means of purchase when the ex- 


change of matter is but one-sided, and purchase and 
sale do not coincide. The frontier trade at Kiachta 
o. g. is both actually and according to treaty, one of 
barter, in which silver plays only the part of a measure 
of value. The war of 1857-58 compelled the Chinese to 
sell without buying. Silver suddenly appeared now as 
a means of purchase. Out of regard to the letter of 
the treaty, the Russians made up the French five frank 
coins into crude silver commodities, which were made to 
serve as a means of exchange. Silver has always served 
as a means of purchase between Europe and America 
on one side and Asia on the other, where it settles down 
in the form of hoards. Furthermore, the precious 
metals serve as international means of purchase when 
ever the ordinary balance of exchange of matter between 
two nations is suddenly upset, as e. g. when a failure 
of crops forces one of them to buy on an extraordinary 
scale. Finally, the precious metals are international 
means of purchase in the hands of gold and silver pro 
ducing countries, in which case they directly constitute 
a product and commodity and not merely a converted 
form of a commodity. The more the exchange of com 
modities between different national spheres of circula 
tion is developed, the more important becomes the func 
tion of world money to serve as a means of payment 
for the settlement of international balances. 

Like home circulation, international circulation re 
quires a constantly changing quantity of gold and silver. 
A part of the accumulated hoards serves therefore, in 
each country as a reserve fund of world money, which 
now doc-lines, now rises, according to the fluctuations of 


the exchange of commodities. 1 Besides the special move 
ments which take place between national spheres of 
circulation, world-money possesses a universal move 
ment, whose starting points are at the sources of produc 
tion from which gold and silver streams spread out in 
different directions all over the world market. Here 
gold and silver enter the world circulation as commodi 
ties and are exchanged for commodity equivalents in 
proportion to the labor-time contained in them, before 
they penetrate national spheres of circulation. In the 
latter, they appear now with a given magnitude of value. 
Every fall or rise in the cost of their production equally 
affects, therefore, their relative value throughout the 
world market ; on the other hand, that value is en 
tirely independent of the extent to which the different 
national spheres of circulation absorb gold or silver. The 
part of the metal stream which is caught up by every 
separate sphere in the world of commodities, partly 
enters directly the home circulation of money to make 
up for worn out coin ; partly is dammed up in the differ 
ent reservoirs containing hoards of coin, means of pay 
ment and world-money; partly is turned into articles of 

1 "II danaro ammassato supplisce a quella somma, che per 
essere attualmente in circolazione, per Peventuale promiscuitil 
de commerci si allontana e sorte della, sfera della circolasione 
mcdesima" ("The accumulated money supplements that 
amount which, in order to be actually in circulation and to 
meet all possible perturbations of trade, retires from that 
sphere of circulation." (G. R. Carli, note to Berri s "Medi- 
tazioni sulla Economia Politica," p. 196, t. XV. of Custodi a 
1. c.) 


luxury, while the rest simply forms a treasure. At an 
advanced stage of development of the capitalist system 
of production the formation of hoards is reduced to the 
minimum required by the various processes of circula 
tion for the free play of their mechanism. The hoard 
as such becomes idle wealth, unless it appears as a tem 
porary form of a surplus resulting from a favorable bal 
ance of payments or as the result of an interrupted ex 
change of matter, i. e. as the solidification of a com 
modity in its first metamorphosis. 

Gold and silver, in their capacity of money, being 
by conception universal commodities, assume in their 
capacity of world money the form adapted to a 
universal commodity. To the extent to which all 
commodities are exchanged for them, they become 
the transformed impersonation of all commodities 
and, therefore, universally alienable commodities. 
Their function of serving as the embodiment of 
universal labor-time is realized more and more as the 
interchange of matter produced by concrete labor em 
braces increasing parts of the world. They become uni 
versal equivalents to the extent to which the series of par 
ticular equivalents which constitute their spheres of ex 
change, increases. Since in the sphere of world circula 
tion commodities unfold their own exchange value on a 
universal scale, they assume the form of world money 
when transformed into gold and silver. As commodity 
owning nations are thus turning gold into money by their 
diversified industry and universal trade, industry and 
trade appear to them only as a means of getting money 
out of the world market in the shano of gold and silver. 


Gold and silver, as world money, are, therefore, as much 
products of the universal circulation of commodities as 
they are means of widening its sphere. Like chemistry 
which grew up behind the backs of the alchemists who 
tried to find a way of making gold, so do the sources 
of world industry and world trade spring up behind the 
backs of the owners of commodities, while they are hunt 
ing for the commodity in its magic form. Gold and sil 
ver help to create the world market by anticipating its 
existence in their conception of money. That this magic 
effect of the precious metals is by no means confined to 
the period of infancy of capitalist society but is a neces 
sary outgrowth of the perverse conception which the 
representatives of the commodity world have of their 
own work in society, is shown by the extraordinary in 
fluence exerted in the middle of the nineteenth century 
by the discovery of new gold fields. 

Just as money develops into world-money, so the com 
modity owner develops into a cosmopolitan. The cos 
mopolitan relation of men is originally only a relation 
of commodity owners. The commodity as such rises 
above all religious, political, national, and language bar 
riers. Price is its universal language and money, its 
common form. But with the development of world- 
money as distinguished from national coin, there de 
velops the cosmopolitanism of the commodity owner as 
the faith of practical reason opposed to traditional, re 
ligious, national and other prejudices which ^hinder the 
interchange of matter among mankind. As the iden 
tical gold that lands in England in the form of American 
eagles, turns there into sovereigns and three days later 


circulates in Paris in the form of Napoleons, only to 
emerge in Venice in a few weeks as so many ducats, 
retaining all the while the same value, it becomes clear 
to the commodity owner that nationality "is but the 
guinea s stamp." The lofty idea which he conceives of 
the entire world is that of a market, the world market. 1 


The process of capitalist production first of all takes 
hold of the metallic circulation as of a ready, trans 
mitted organ which, though undergoing a gradual trans 
formation, always retains fits fundamental structure. 
The question as to why gold and silver and not other 
commodities serve as money material falls outside the 
limits of the capitalist system. We shall, therefore, 

1 Montanari, "Delia Moneta," 1683, 1. c., p. 40. "E co*i 
fattamente diffusa per tutto il globo terrestre la communion 
zione de populi insieme, che puo quasi dirsi esser il mondo 
tutto divinuto una sola citta in cui si fa pcrpetua fiera d ogni 
mercanzia, e dove ogni uomo di tutto cio che la terra, gli 
animali e 1 umana industria altrove producono, puo mediants 
il danaro stando in sua casa provedersi e godere. Maravigli- 
osa invenzione." ("The communication of nations among 
themselves is so widely extended all over the globe that it 
may be almost said that the entire world has become one city 
in which a perpetual fair of merchandise is held and where 
every man may by means of money acquire and enjoy, while 
staying at home, all that the earth, the animals and humr,n 
industry produce elsewhere. Marvelous invention!") 

confine ourselves to summing up the most essential 

Since universal labor-time admits of quantitative dif 
ferences only, the object which is to serve as its specific 
incarnation must be capable of representing purely quan 
titative differences, i. e., it must be homogeneous and uni 
form in quality throughout. That is the first condition 
a commodity must satisfy to perform the function of 
a measure of value. If commodities were estimated 
in oxen, hides, grain, etc., they would really have 
to be estimated in an ideal average ox, or average hide, 
since there are qualitative differences be,twen an ox and 
an ox, grain and grain, hide and hide. On the contrary, 
gold and silver, as elementary substances, are always 
the same, and equal quantities of them represent, there 
fore, values of equal magnitude. 1 The other condition, 
which a commodity that is to serve as a universal equiva 
lent must satisfy and which follows directly from its 
function of representing purely quantitative differences, 
is that it must be capable of being divided and re-united 
at will, se that money of account may be represented 

1 I metalli ban questo di proprio e singulare che in essi soli 
tutte le ragioni si riducono ad una che e la loro quantitil, non 
avendo ricevuto delle natura diversa qualita ne nell interna 
loro constituzione ne nell externa forma e fattura." (Galiani, 
1. c., p. 130.) ("Metals have this singular property, that 
everything in them is reduced to one consideration, viz., that 
of quantity, since they are not endowed by nature with any 
differences in quality either in their internal structure or in 
their external form and shape.") 


materially as well. Gold and silver possess these prop 
erties to a superior degree. 

As mediums of circulation, gold and silver have this 
advantage over other commodities, that their high speci 
fic gravity which condenses much weight in little space, 
corresponds to their economic specific gravity which con 
denses relatively much labor-time, i. e. a great quantity 
of exchange value in a small volume. This insures 
facility of transport, of transition from hand to hand 
and from one country to another, the ability to appear 
as rapidly as to disappear, in short, that material mobil 
ity which constitutes the sine qua non of the com 
modity that is to serve as the perpetuum mobile of the 
process of circulation. 

The high specific value of the precious metals, their 
durability, comparative indestructibility, insusceptibility 
of oxidation through the action of the air, in the case 
of gold insolubility in acids except in aqua regia, 
all these natural properties make the precious metals 
the natural material for hoarding. Peter Martyr who 
seems to have been a great lover of chocolate, remarks, 
therefore, of the cacao-bags which formed a species 
of Mexican gold : "0 felicem monetam, quae suavem 
utilemque praebet humane generi potum, et a tartarea 
peste avaritiae suos immunes servat possessores, quod 
Buffodi aut diu servari nequeat." 

1 De Orbe Novo. "O, happy coin, which furnishes mankind 
with & pleasant and useful beverage and keeps its possessors 
immune from the hell-born pest of avarice, since it can not be 
either buried or preserved long." 


The great importance of metals in general in the 
direct process of production is due to the part they 
play as instruments of production. Apart from their 
scarcity, the great softness of gold and silver as com 
pared with iron and even copper (in the hardened state 
in which it was used by the ancients), makes them unfit 
for that application and deprives them, therefore, to a 
great extent, of that property on which the use-value 
of metals is generally based. Useless as they are in 
the direct process of production, they are easily dis 
pensed with as means of existence, as articles of con 
sumption. For that reason any desired quantity of 
them may be absorbed by the social process of circulation 
without disturbing the processes of direct production 
and consumption. Their individual use-value does not 
come in conflict with their economic function. Further 
more, gold and silver are not only negatively super 
fluous, i. e. dispensable articles, but their aesthetic 
properties make them the natural material of luxury, 
ornamentation, splendor, festive occasions, in short, 
the positive form of abundance and wealth. They 
appear, in a way, as spontaneous light brought out from 
the underground world, since silver reflects all rays of 
light in their original combination, and gold only the 
color of highest intensity, viz. red light. The sensation 
of color is, generally speaking, the most popular form 
of aesthetic sense. The etymological connection between 
the names of the precious metals, and the relations of 
colors, in the different Indo-Germanic languages has 
been established by Jacob Grimm (see his History of 
the German Language). 

Finally, the susceptibility of gold and silver of being 
turned from coin into bullion, from bullion into articles 
of luxury and vice versa, i. e. the advantage they possess 
as against other commodities in not being tied down to a 
definite, exclusive form in which they can be used, makes 
them the natural material of money, which must con 
stantly change from one form to another. 

Nature no more produces money than it does bankers 
or discount rates. But since the capitalist system of 
production requires the crystallization of wealth as a 
fetich in the form of a single article, gold and silver 
appear as its appropriate incarnation. Gold and silver 
are not money by nature, but money is by nature gold 
and silver. In the first place, the silver or gold money 
crystal is not only the product of the process of circula 
tion, but in fact its only final product. In the second 
place, gold and silver are ready and direct products of 
nature, not distinguished by any difference of form. 
The universal product of the social process or the social 
process itself as a product is a peculiar natural product, 
a metal hidden in the bowels of the earth and extracted 

We have seen that cold and silver are unable to fulfill 

1 In 700 a multitude of poor people emigrated to the south 
of Prague to wash the gold sand found there, and three men 
were able to extract three marks of gold a day. As a result 
of that the run on the "diggings" and the numhor of hands 
taken nvvny from agriculture became so great that the country 
was visited by a famine the following year. See M. G. Korner, 
"Abhandlung von drm Alterthum des BOhmi^chen Bergvverks," 
S chnerbrrs. . 17H8. 


the requirements which they are expected to meet in 
their capacity of money, viz. to remain values of unvary 
ing magnitude. Still, as Aristotle had already observed, 
they possess a more constant value than the average 
of other commodities. Apart from the universal 
effect of an appreciation or depreciation of the precious 
metals, the fluctuations in the ratio between the values 
of gold and silver has a special importance, since both 
serve side by side in the world market as money mate 
rial. The purely economic causes of this change of 
value must be traced to the change in the labor-time 
required for the production of these metals; conquests 
and other political upheavals which exercised a great 
influence on the value of metals in the ancient world, 
have nowadays only a local and transitory effect. The 
labor-time required for the production of the metals 
will depend on the degree of their natural scarcity, as 
well as on the greater or less difficulty with which they 
can be obtained in a purely metallic state. As a matter 
of fact, gold is the first metal discovered by man. This 
is due to the fact that nature itself furnishes it partly 
in pure crystalline form, individualized, free from 
chemical combination with other substances,, or, as the 
alchemists used to say, in a virgin state; and so far as 
it does not appear in that state, nature does the technical 
work in the great gold washeries of rivers. Only 
the crudest kind of labor is thus required of man 
in the extraction of gold, either from rivers or from 
alluvial deposits; while the extraction of silver pre 
supposes the development of mining and a comparatively 
high degree of technical skill generally. For that 


reason the value of silver is originally greater than that 
of gold in spite of the lesser absolute scarcity of the 
former. Strabo s assertion that a certain Arabian tribe 
gave ten pounds of gold for one pound of iron and two 
pounds of gold for one pound of silver, seems by no means 
incredible. But as the productive powers of labor in 
society are developed and the product of unskilled 
labor rises in value as compared with the product of 
skilled labor; as the earth s crust is more thoroughly 
broken up and the original superficial sources of gold 
supply give out, the value of silver begins to fall in 
proportion to that of gold. At a given stage of develop 
ment of engineering and of the means of communica 
tion, the discovery of new gold or silver fields become the 
decisive factor. In ancient Asia the ratio of gold to 
silver was 6 to 1 or 8 to 1 ; the latter ratio prevailed in 
China and Japan as late as the beginning of the nine 
teenth century; 10 to 1, the ratio in Xenophon s time, 
may be considered as the average ratio of the middle 
period of antiquity. The exploitation of the Spanish 
silver mines by Cartilage and later by Rome had about 
the same effect in antiquity, as the discovery of the 
American mines in modern Europe. For the period of 
the Roman empire 15 or 16 to 1 may be assumed as a 
rough average, although we frequently find cases of still 
greater depreciation of silver in Rome. The same move 
ment beginning with the relative depreciation of gold 
and concluding with the fall in the value of silver, is 
repeated in the following epoch which has lasted from 
the Middle Ages to the present time. As in Xenophon s 
times the average ratio in the Middle Ages was 10 to 1. 
changing to 16 or 15 to 1 in consequence of the discovery 


of the American mines. The discovery of the Aus 
tralian, Californian and Columbian gold sources makes 
a new fall in the value of gold probable. 1 


As the universal thirst for gold prompted nations and 
princes in the sixteenth and seventeenth centuries, the 
period of infancy of modern bourgeois society, to cru- 

1 So far the Australian and other discoveries have not af 
fected the ratio of the values of gold and silver. The assertions 
to the contrary of Michel Chevalier are worth as much as the 
Socialism of this ex-St. Simonist. The quotations of silver on 
the London market prove, however, that the average gold 
price of silver during 1850-1858 is not quite 3 per cent, higher 
than the price during 1830-1850. But this rise in price is 
accounted for simply by the Asiatic demand for silver. In the 
course of the years 1852-1858 the price of silver was chang 
ing in certain years and months only with a change in this 
demand, and in no case with the importation of gold from the 
newly discovered sources. The following is a summary of the 
gold prices of silver on the London market. 


July. November. 
60% pence 61% pence 
61% pence 61% pence 
61% pence 
61% pence 
61% pence 
61% pence 

Tear March. 

1852 60y 8 pence 

1853 61% pence 

1854 61% pence 

1865 60% pence 

1856 60 pence 

1857 61% pence 

1868 61% pence 

60y 8 pence 
62% pence 
61% pence 


sades beyond the sea in search of the golden grail/ the 
first interpreters of the modern world, the founders of 
the monetary system, of which the mercantile system is 
but a variation, proclaimed gold and silver, i. e. money, 
as the only thing that constitutes wealth. They were 
quite right when, from the point of view of the simple 
circulation of commodities, they declared that the mis 
sion of bourgeois society was to make money, i. e. to 
build up everlasting treasures which neither moth nor 
rust could eat. It is no argument with the monetary 
system to say that a ton of iron whose price is 3 con 
stitutes a value of the same magnitude as 3 worth of 
gold. The point here is not the magnitude of the ex 
change value, but as to what constitutes its adequate 
form. If the monetary and mercantile systems single 
out international trade and the particular branches of 
national industry directly connected with that trade 
as the only true sources of wealth or money, it must be 
borne in mind, that in that period the greater part of 
national production was still carried on under forms 
of feudalism and was the source from which producers 
drew directly their means of subsistence. Products, a< 
a rule, were not turned into commodities nor, therefore- 
into money : they did not enter into the general social 
interchange of matter : did not. therefore, appear as 
embodiments of universal abstract labor ; and did not, 

"Gold is a wonderful tliinjr! Whoever possesses it, i* mas 
ter of all that he desires. I y means of gold even admission to 
Heaven may IK- gained for souls." (Columbus in a letter from 
Jamaica in 1503). 


in fact, constitute bourgeois wealth. Money as the end 
and object of circulation is exchange value or abstract 
wealth, but it is no material element of wealth and does 
not form the directing goal and impelling motive of 
production. True to the conditions as they prevailed 
in that primitive Binge of bourgeois production, those 
unrecognized prophets held fast to the pure, tangible, 
and resplendent form of exchange value, to its form of 
a universal commodity as against all special commod 
ities. The proper bourgeois economic sphere of that 
period was the sphere of the circulation of commodities. 
Hence, they judged the entire complex process of bour 
geois production from the point of view of that ele 
mentary sphere and confounded money with capital. 
The unceasing war of modern economists against the 
monetary and mercantile system is mostly due to the 
fact that this system blabs out in brutally naive fashion, 
the secret of bourgeois production, viz. its subjection 
to the domination of exchange value. Ricardo, though 
wrong in the application he makes of it, remarks some 
where that even in times of famine, grain is imported 
not because the nation is starving, but because the grain 
dealer is making money. In its criticism of the mone 
tary and mercantile system, political economy, by at 
tacking that system as a mere illusion and as a false 
theory, fails to recognize in it the barbaric form of its 
own fundamental principles. Furthermore, this system 
has not only an historic justification, but within certain 
spheres of modern economy retains until now the full 
rights of citizenship. At all stages of the bourgeois 
system of production in which wealth assumes the ele- 


mentary form of a commodity,, exchange value assumes 
the elementary form of money and in all phases of the 
process of production wealth reassumes for a moment 
the universal elementary commodity form. Even at 
the most advanced stage of bourgeois economy, the 
specific functions of gold and silver to serve as money, 
in contradistinction to their function of mediums of 
circulation a function which distinguishes them from 
all other commodities is not done away with, but only 
limited, hence the monetary and mercantile system re 
tains its right of citizenship. The Catholic fact that 
gold and silver are contrasted with other profane com 
modities as the direct incarnation of social labor, that 
is as the expression of abstract wealth, naturally offends 
the Protestant point d honneur of bourgeois economy, 
and out of fear of the prejudices of the monetary system 
it had lost for a long time its grasp of the phenomena 
of money circulation, as will be shown presently. 

It was quite natural that, contrary to the monetary 
and mercantile system which knew money only in its 
form of a crystallized product of circulation, classical 
political economy should have conceived money first of 
all in its fluent form of exchange value arising and dis 
appearing within the process of the metamorphosis of 
commodities. And since the circulation of commodities 
is regarded exclusively in the form of C M C and the 
latter in its turn, exclusively in its aspect of a dynamic 
unity of sale and purchase, money comes to be regarded 
in its capacity of a medium of circulation as opposed to 
its capacity of money. And when that medium of cir 
culation is isolated in its function of coin, it turns, as 


we have seen, into a token of value. But since classical 
political economy had to deal with metallic circulation 
as the prevailing form of circulation, it defined metallic 
money as coin, and metallic coin as a mere token of 
value. In acordance with the law governing the circula 
tion of tokens of value, the proposition was advanced 
that the prices of commodities depend on the quantity 
of money in circulation instead of the opposite principle 
that the quantity of money in circulation depends on 
the prices of commodities. We find this view more or 
less clearly expressed by the Italian economists of the 
seventeenth century; LOCKE now asserts, now denies 
that principle ; it is clearly elaborated in the "Spectator" 
(of October 19, 1711) by MONTESQUIEU AND 
HUME. Since Hume was by far the most important 
representative of this theory in the eighteenth century, 
we shall commence our review with him. 

Under certain assumptions, an increase or decrease 
in the quantity either of the metallic money in circula 
tion, or of the tokens of value in circulation seems to 
affect uniformly the prices of commodities. With each 
fall or rise of the value of gold or silver in which the 
exchange values of commodities are estimated as prices, 
there is a rise or fall of prices, because of the change in 
their measure of value ; as a result of the rise or fall of 
prices, a greater or smaller quantity of gold and silver 
is circulating as coin. But the apparent phenomenon 
is the fall in prices the exchange value of commodities 
remaining the same accompanied by an increased or 
diminished quantity of the medium of circulation. On 
the other hand, if the quantity of tokens of value rises 


above or falls below its required level, it is forcibly 
reduced to the latter by a fall or rise of prices. In 
either case the same effect seems to be brought about 
by the same cause, and Hume holds fast to this sem 

Every scientific inquiry into the relation between the 
volume of the circulating medium and the movement 
of prices must assume the value of the money material as 
given. Hume, on the contrary, considers exclusively 
periods of revolution in the value of the precious metals, 
i. e. revolutions in the measure of value. The rise of 
prices which occurred simultaneously with the increase 
of metallic money after the discovery of the American 
mines forms the historical background of his theory, 
while his polemic against the monetary and mercantile 
system furnishes its practical motive. The importation 
of precious metals can naturally increase while their cost 
of production remains the same. On the other hand, u 
decrease in their value, i. e. in the labor-time required 
for their production will reveal itself first of all in 
their increased imports. Hence, said the later followers 
of Hume, a decrease in the value of the precious metals, 
reveals itself in an increased volume of the circulating 
medium, and the increased volume of the latter is shown 
in the rise of prices. As a matter of fact, however, the 
rise in price affects only exported commodities, which are 
exchanged for gold and silver as commodities and not 
as mediums of circulation. Thus, the prices of these 
commodities, which are now estimated in gold and sil 
ver of lower value, rise as compared with the prices of 
all other commodities whose exchange value contipries 

.V/w J_ 

to be estimated in gold or silver according to the stand 
ard of their old cost of production. This two-fold ap 
praisement of the exchange values of commodities in 
the same country can naturally be only temporary, and 
the gold and silver prices must become equalized in the 
proportions determined by the exchange values them 
selves, so that finally the exchange values of all com 
modities come to be estimated according to the new value 
of the money material. The development of this pro 
cess, as well as the ways and means in which the 
exchange value of commodities asserts itself within the 
limits of the fluctuations of market prices, do not fall 
within the scope of this work. But that this equaliza 
tion takes place but gradually in the early periods of 
development of bourgeois production and extends over 
long periods of time, never keeping pace with the in 
crease of cash in circulation, has been strikingly demon 
strated by new critical investigations of the movement 
of prices of commodities in the sixteenth century. 1 The 
favorite references of Hume s followers to the rise of 
prices in ancient Home in consequence of the conquests 
of Macedonia, Egypt and Asia Minor, are quite irrele 
vant. The characteristic method of antiquity of sud 
denly transferring hoarded treasures from one country 
to another, which was accomplished by violence and thus 
brought about a temporary reduction of the cost of 

1 The slowness of the process was admitted by Hume, al 
though it but little agrees with his principle. See David Hume 
"Essays and Treatises on several subjects." London, 1777, v. 
I, p. 300. 


production of precious metals in a certain country by 
the simple process of plunder, affects just as little the 
intrinsic laws of money circulation, as the gratuitous 
distribution of Egyptian and Sicilian grain in Eome 
affected the universal law governing the price of grain. 
Hume, as well as all other writers of the eighteenth 
century, was not in possession of the material necessary 
for the detailed observation of the circulation of money. 
This material, which first becomes available with the full 
development of banking, includes in the first place a 
critical history of prices of commodities, and in the sec 
ond, official and current statistics relating to the expan 
sion and contraction of the circulating medium, the im 
ports and exports of the precious metals, etc. Hume s 
theory of circulation may be summed up in the follow 
ing propositions: 1. The prices of commodities in 
a country are determined by the quantity of money 
existing there (real or symbolic money) ; 2. The money 
current in a country represents all the commodities to 
be found there. In proportion "as there is more or less 
of this representation," i. e. of money, "there goes a 
greater or less quantity of the thing represented to the 
same quantity of it"; 3. If commodities increase in 
quantity, their price falls or the value of money rises. 
If money increases in quantity, then, on the contrary, 
the price of commodities rises and the value of money 
declines. 1 

"The dearness of everything," says Hume, "from 
plenty of money, is a disadvantage, which attends an 

1 Conf. Steuart, 1. c. v. I, p. 394-400. 


established commerce, and sets bounds to it in every 
country, by enabling the poorer states to undersell the 
richer in all foreign markets." 2 "Where coin is in great 
er plenty ; as a greater quantity of it is required to repre 
sent the same quantity of goods ; it can have no effect, 
either good or bad, taking a nation within itself; any 
more than it would make an alteration on a merchant s 
books, if, instead of the Arabian method of notation, 
which requires few characters, he should make use of 
the Eoman, which requires a great many. Nay, the 
greater quantity of money, like the Koman characters, 
is rather inconvenient, and requires greater trouble 
both to keep and transport it." 3 In order to prove any 
thing, Hume should have shown that under a given 
system of notation the quantity of characters used does 
not depend on the magnitude of the numbers, but that 
on the contrary, the magnitude of the numbers depends 
on the quantity of the characters used. It is perfectly 
true that there is no advantage in estimating or "count 
ing" values of commodities in depreciated gold and 
silver, and that is the reason why nations have always 
found it more convenient with the growth of the value 
of the commodities in circulation to count in silver in 
preference to copper, and in gold rather than in silver. 
In proportion as the nations became richer, they con 
verted the less valuable metals into subsidiary coin and 
the more valuable ones into money. Furthermore, Hume 
iorgets that in order to count values in gold and silver, 

4 David Hume, 1. c. p. 300. 
David Hume, 1. c. p. 303. 


it is not necessary that either gold or silver should be 
"on hand." Money of account and the medium of cir 
culation are identical with him and both are "coin." 
Hume concludes that a rise or fall of prices depends 
on the quantity of money in circulation, because a 
change in the value of the measure of value, i. e. of 
the precious metals which serve as money of account, 
causes a rise or fall of prices and, consequently, also a 
change in the amount of money in circulation, the rap 
idity of the latter remaining the same. That not only 
the quantity of gold and silver increased in the sixteenth 
and seventeenth centuries, but that the cost of their pro 
duction had declined at the same time, Hume could know 
from the closing up of the European mines. In the six 
teenth and seventeenth centuries the prices of commodi 
ties increased in Europe with the influx of the mass of 
American gold and silver ; hence the prices of com 
modities in every land are determined by the mass 
of gold and silver to be found there. This was Hume s 
first "necessary consequence." : In the sixteenth and 
seventeenth centuries prices had not risen uniformly witli 
the increase of the quantity of precious metals; more 
than half a century passed before any change in prices 
became perceptible, and even then it took a long time 
before the exchange values of commodities came to be 
generally estimated according to the depreciated valm> 
of gold and silver, i. e. before the revolution affected 
the general price level. Hence, concludes Hume, who, 
quite contrary to the principles of his philosophy, gen- 

1 David Hume, 1. c. p. 303. 


eralizes indiscriminately from imperfectly observed 
facts, prices of commodities or the value of money de 
pend not on the total amount of money to be found 
in the country, but rather on the quantity of gold and 
silver which is actually in circulation; but in the long 
run all the gold and silver in the country must be 
absorbed by circulation in the form of coin. 1 It is 
clear that if gold and silver have a value of their own, 
then, apart from all other laws of circulation, only a 
definite quantity of gold and silver can circulate as the 
equivalent of commodities of a given value. If, there 
fore, every quantity of gold and silver which happens 
to be in a country must enter the sphere of exchange of 
commodities as a medium of circulation without regard 
to the total value of the commodities, then gold and 
silver have no intrinsic value and are in fact no real 
commodities. That is Hume s third "necessary conse 
quence." He makes commodities enter the process of 
circulation without price and gold and silver without 
value. That is the reason why he never speaks of the 

1 David Hume, 1. c. p. 307, 308, 303 : "It is evident, that the 
prices do not so much depend on the absolute quantity of com 
modities, and that of money, which are in a nation, as on that 
of the commodities, which can or may come to market, and of 
the money which circulates. If the coin be locked up in chests, 
it is the same thing with regard to prices, as if it were anni 
hilated ; if the commodities be hoarded in magazines and 
granaries, a like effect follows. As the money and commodities 
in these cases, never meet, they cannot affect each other. The 
whole (of prices) at last reaches a just proportion with the 
new quantity of specie which is in the kingdom." 


value of commodities and of gold, but onfy of their 
relative quantities. Locke had already said that gold 
and silver had merely an imaginary or conventional 
value ; the first brutal expression of opposition to the 
assertion of the monetary "system" that gold and silver 
alone have true value. That gold and silver owe their 
character of money to the function they perform in 
the social process of exchange is interpreted to the effect 
that they owe their own value and therefore the magni 
tude of their value to a social function. 1 Gold and 
silver are thus worthless things, which, however, acquire 
a fictitious value within the sphere of circulation as 
representatives of commodities. They are converted by 
the process of circulation not into money, but into value. 
This value of theirs is determined by the proportion 
between their own volume and that of the commodities, 
since the two must balance each ether. Thus, Hume 
makes gold and silver enter the world of commodities 
as non-commodities ; but as soon as they appear in the 
form of coin, he turn? them, on the contrary, into mere 
commodities, which must be exchanged for other com 
modities by simple barter. In that manner, if the world 
of commodities consisted of but one commodity, say one 
million quarters of grain, the idea would work itself 
out very simply; viz., one quarter of grain would be 
exchanged for two ounces of gold if there were alto 
gether two million ounces of gold, and for twenty 

1 See Law and Franklin about surplus value which gold and 
eilver are supposed to acquire from their function of money. 


ounces of gold, if there were a total of twenty million 
ounces, the price of the commodity and the value of 
money rising or falling in inverse ratio to the quantity 
of gold in existence. 1 But the world of commodities 
consists of an endless variety of use-values, whose rela 
tive values are by no means determined by their relative 
quantities. How, then, does Hume conceive this ex 
change of the volume of commodities for the volume of 
gold ? He contents himself with the meaningless, hollow 
idea that every commodity is exchanged as an aliquot 
part of the entire volume of commodities for a corre 
sponding aliquot part of the volume of gold. The 
process of the movement of commodities due to the 
antagonism between exchange value and use-value which 
commodities bear within themselves, and which mani 
fests itself in the circulation of money, becoming cry 
stallized in different forms of the latter, is thus done 
away with, giving place to the imaginary mechanical 
equalization process between the quantity of precious 
metals to be found in a country and the volume of com 
modities existing there at the same time. 

SIR JAMES STEUART opens his inquiry into the 
nature of coin and money with an elaborate criticism of 
Hume and Montesquieu. 2 He is really the first to ask 
this question: is the quantity of current money deter- 

1 This fiction is literally advanced by Montesquieu. [The pas 
sage from Montesquieu is quoted by Marx in his Capital, v. I. 
Part 1, Ch. Ill, section 2, b, foot-note. Note by K. Kautsky to 
2nd German edition]. 

Stewart, 1. c. v. I., p. 394 seq. 


mined by the prices of commodities, or are the prices of 
Commodities determined by the quantity of current 
money? Although his analysis is obscured by his 
fantastic conception of the measure of value, hi? 
vacillating view of exchange value and by remi 
niscences of the mercantile system, he discovers 
the essential forms of money and the general laws of the 
circulation of money, because he makes no attempt at a 
mechanical separation of commodities from money, but 
proceeds to develop its different functions from the 
different aspects of the exchange of commodities. Money 
is used, he says, for two principal purposes : for the pay 
ment of debts and for the purchase of what one needs ; 
the two together form "ready money demands." Tho 
state of trade and industry, the mode of living, the 
customary expenditures of the people, taken all to 
gether regulate and determine the volume of "ready 
money demands," i. e. the number of "alienations." In 
order to effect this multitude of payments, a certain pro 
portion of money is required. This proportion may in- 
rrease or decrease according to circumstances, even while 
the number of alienations remains the same. At any 
rate, the circulation of a country can absorb only a 
definite quantity of money. 1 "Tt i? the complicated 
operations of demand and competition which determines 
fhe standard price of everything" : the latter "does not 
in the least depend on the quantity of gold and silver 

1 Stcuart, 1. c., v. 2, p. 377-370 pnssim (not found in the 
1767 London edition. Trnnslntor) . 


in the country." 1 What then will become of the gold 
and silver that is not required as coin ? They are hoard 
ed or used in the manufacture of articles of luxury. If 
the quantity of gold and silver fall below the level 
required for circulation, symbolic money or other sub 
stitutes take its place. If a favorable rate of exchange 
brings about a surplus of money in the country and 
cuts off at the same time the demand for its shipment 
abroad, it will accumulate in strong-boxes, where the 
"riches will remain without producing more effect than 
if they had remained in the mine." 

The second law discovered by Steuart is that of the 
reflux of credit circulation to its starting point. Finally, 
he works out the effects which the disparity of the rates 
of interest in different countries produces upon the in 
ternational export and import of precious metals. The 
last two points we mention here only for the sake of 
completeness, since they have but a remote bearing on 
the subject of our discussion. 2 Symbolic money or credit 

Steuart. 1. c., p. 379-380 passim (London, 1767 edition, v. 
1. p. 400. Transl.). 

! "The additional coin will be locked up, or converted into 
plate. ... As for the (paper money, so soon as it has served 
the first purpose of supplying the demand of him who borrowed 
it, it will return upon the debtor in it and become realized. 
. . . Let the specie of a country, therefore, be axigmented or 
diminished in ever so great a proportion, commodities will still 
rise and fall according to the principles of demand and com 
petition, and these will constantly depend upon the inclinations 
of those who have property or any kind of equivalent whatao- 


money Steuart does not as yet distinguish between 
the two forms of money may take the place of precious 
metals as a means of purchase or means of payment in 
the sphere of home circulation, but never in the world 

ever to give, but never upon the quantity of coin they are pos 
sessed of. . . Let it (namely, the quantity of specie in a 
country) be ever so low, while there is real property of any 
denomination in the country, a competition to consume in those 
who possess it, prices will be high, by the means of barter, 
symbolical money, mutual pnvstations and a thousand other in 
ventions. ... If this country has a communication with 
other nations, there must be a proportion between the prices 
of many kinds of merchandize there and elsewhere, and a sud 
den augmentation or diminution of the specie, supposing it 
could of itself operate the effects of raising or sinking prices, 
would be restrained in its operation by foreign competition." 
1. c. v. 1, p. 400-402. "The circulation of every country must 
be in proportion to the industry of the inhabitants producing 
the commodities which come to market. . . If the coin of a 
country, therefore, falls below the proportion of the price of in 
dustry offered to sale, inventions, like symbolical money, will be 
fallen upon, to provide for an equivalent for it. But if the 
specie be found above the proportion of industry, it win have 
no effect in raising prices, nor will it enter into circulation: it 
will be hoarded up in treasures. . . . Whatsoever be the 
quantity of money in a nation, in correspondence with the rest 
of the world, there never can remain in circulation, but the 
quantity nearly proportional to the consumption of the rich 
and to the labour and industry of the poor inhabitants," and 
this proportion is not determined "by the quantity of money 
actually in the country" (1. c. p. 403-408 passim.) "All na 
tions will endeavor to throw their ready money, not necessary 
for their own circulation, into that country where the interest 
of money is high with respect to their own." (1. c. v. 2. p. 5). 


market. Paper notes are therefore "money of the so 
ciety," while gold and silver are "money of the world/ 
It is characteristic of nations with an "historical" de 
velopment, in the sense in which the term is used by 
the historical school of law, to keep forgetting their 
own history. Although the controversy as to the rela 
tion of prices of commodities to the volume of the 
circulating medium has been continually agitating Par 
liament for the last half a century, and has precipitated 
in England thousands of pamphlets, large and small, 
Steuart has remained even more of a "dead dog" than 
Spinoza seemed to be to Moses Mendelson in Lessing s 
time. Even the latest writer on the history of "cur 
rency," Maclaren, makes Adam Smith the original au 
thor of Steuart s theory, and Ricardo of Hume s theory." 

"The richest nation in Europe may be the poorest in circulating 
specie." 1. c., v. 2, p. 6. For the polemics against Steuart see 
Arthur Young. [In his foot-note in Capital, v. 1, Part 1, ch. 
III., section 2, b. p. 62, Humboldt ed., Marx says: The theory 
of Hume was defended against the attacks of J. Steuart and 
others, by A. Young, in his "Political Arithmetic," London, 
1774, in which work there is a special chapter entitled "Prices 
depend on quantity of money." Note by K. Kautsky to 2nd 
German edition]. 

1 Steuart, 1. e., v. 2, p. 370. Louis Blanc translates the ex 
pression "money of the society" which stands for home or na 
tional money, as socialist money, which is perfectly meaning 
less and makes a Socialist of John Law. (See the first volume 
of his History of the French Revolution ) . 

* Maclaren, 1. c. p. 43 seq. Patriotism led Gustav Julius, a 
German writer who met with very early death, to hold up old 
Bush as an authority as against the Ricardian school. Honest 

While Ricardo elaborated Hume s theory, Adam Smith 
registered the results of Steuart s investigations as 
dead facts. Adam Smith applied the Scotch say 
ing that "mony mickles mak a muckle" even to his 
spiritual wealth, and therefore concealed with petty 
care the sources to which he owed the little out of winch 
he tried to make so much. More than once he prefers 
to break off the point of the discussion, whenever he feels 
that an attempt on his part clearly to formulate the 
question would compel him to settle his accounts with 
his predecessors. So in the case of the money theory. 
Tie tacitly adopts Steuart s theory when he says that 
the gold and silver existing in a country is partly 
utilized as coin; partly accumulated in the form of 
reserve funds for merchants in countries without banks, 
or of bank reserves in countries with a credit currency ; 
partly serves as a hoard for the settling of international 
payments ; partly is turned into articles of luxury. He 
passes over without remark the question as to the quan 
tity of coin in circulation, treating money quite wrongly 
as a mere commodity. 1 His vulgarizer, the dull J. B. 

Biisch rendered Steuart s elegant English into Hamburg Platt 
and by trying to improve upon the original spoiled it as often 
as he could. 

* Note to the 2nd edition : This is not an exact statement. 
Adam Smith expresses the law correctly on many occasions. 
[See Capital, Humboldt edition, p. 62, ft-note 1, where writing 
seven years later, Marx makes the following qualification: 
"This statement applies only in so far as Adam Smith, ex ofllcio, 
treats of money. Now and then, however, as in his criticism of 
the earlier systems of political economy, he takes the right 


Say, whom the French have proclaimed prince de la 
science like Johann Christoph Gottsched, who pro 
claimed his Schonaich a Homer and himself a Pietro 
Aretino to the terror principum and lux- mundi has 
with great pomp raised this not altogether innocent 
oversight of Adam Smith to a dogma. 2 It must be said, 
however, that his hostile attitude to the illusions of the 
mercantile system prevented Adam Smith from taking 
an objective view of the phenomena of metallic circula 
tion, while his views on credit money are original and 
deep. As in the eighteenth century petrification theories 
there is always felt the presence of an undercurrent 
which springs from either a critical or apologetic atti 
tude toward the biblical tradition of the flood, so there 
is concealed behind all the money theories of the eigh 
teenth century a secret struggle with the monetary 
system, the ghost which had stood guard over the cradle 

view. The quantity of coin in every country is regulated by 
the value of the commodities which are to be circulated by it. 
. . . The value of the goods annually bought and sold in any 
country requires a certain quantity of money to circulate and 
distribute them to their -proper consumers, and can give em 
ployment to no more. The channel of circulation necessarily 
draws to itself a sum sufficient to fill it, and never admits 
any more. Wealth of Nations, Book iv., ch. I."] 

5 The distinction between currency and money is therefore 
not found in "Wealth of Nations." Deceived by the apparent 
impartiality of Adam Smith, who knew his Hume and Steuart 
very well, honest Maclaren remarks: "The theory of the de 
pendence of prices on the extent of the currency had not as yet. 
attracted attention; and Doctor Smith, like Mr. Tx>cke (Locke 
undergoes a change in his view), considers metallic money 
nothing but a commodity." Maclaren, 1. c. p. 44. 


of bourgeois economy and continued to throw its shadow 
over legislation. 

In the nineteentli century, inquiries into the nature 
of money were not prompted directly by phenomena of 
metallic circulation, but rather by those of banknote 
circulation. The former was touched upon only in order 
to discover the laws governing the latter. The suspen 
sion of specie payments by the Bank of England in 
1797, the rise of prices of many commodities which 
followed it, the fall of the mint price of gold below 
its market price, the depreciation of bank-notes, espe 
cially since 1809, furnished the direct practical occasion 
for a party struggle in parliament and a theoretical 
tournament outside of it, both conducted with like pas 
sion. The historical background for the controversy 
was furnished by tiie history of paper money during 
the eighteenth century : the fiasco of Law s bank ; the 
depreciation of the provincial bank-notes of the English 
Colonies in North America from the beginning to the 
middle of the eighteenth century which went hand in 
hand with the increase in the number of tokens of value ; 
further, the Continental bills issued as legal tender by 
the American government during the War of Independ 
ence; and finally, the experiment with the French assig- 
nats carried out on a still larger scale. Most of the 
English writers of that period confound the circulation 
of bank-notes, which is governed by quite different law?, 
with the circulation of tokens of value or government 
legal tender paper money : and while they claim to 
explain the phenomena of this legal tender circulation 
by the laws of metallic circulation, they proceed, as a 


matter of fact, just the opposite way, viz., deduct 
ing laws for the latter from phenomena observed 
in connection with the former. We omit all the 
numerous writers of the period of 1800-1809 and 
turn directly to RICAEDO, both because he embodies 
the views of his predecessors, which he formulates with 
greater precision, and because the shape he gave to the 
theory of money governs English bank legislation until 
this moment. Ricardo, like his predecessors, confounds 
the circulation of bank-notes, or credit money, with the 
circulation of mere tokens of value. The fact which 
impresses him most is the depreciation of paper cur 
rency accompanied by the rise of prices of commodities. 
What the American mines had been to Hume, the paper- 
bill presses in Threadneedle street were to Ricardo, and 
he himself expressly identifies the two factors at some 
place in his works. His first writings, which dealt ex 
clusively with the money question belong to the time 
of the most violent controversy between the Bank of 
England, which had on its side the ministers and the 
war party, and its opponents about whom were centered 
the parliamentary opposition, the Whigs and the Peace 
party. They appeared as immediate forerunners of the 
famous Report of the Bullion Committee of 1810, in 
which Ricardo s views were adopted. 1 The singular 

1 David Ricardo, "The High Price of Bullion, a Proof of the 
Depreciation of Bank-notes." 4th edition, London, 1811. (The 
first edition appeared in 1809) . Further, "Reply to Mr. Bosan- 
quet s Practical Observations on the Report of the Bullion Com 
mittee." London, 1811. 

circumstance, that Ricardo and his adherents, who held 
money to b3 merely a token of value, are called bullion- 
ists, is due not only to the name of that committee, but 
also to the nature of their theory. In his work on 
political economy, Ricardo repeated and developed fur 
ther the same views, but nowhere has he investigated 
the nature of money as such, as he had done in the cast; 
of exchange value, profit, rent, etc. 

To begin with, Ricardo determines the value of gold 
and silver, like that of all other commodities, by tin- 
quantity of labor-time embodied in them. 1 By means of 
them, as commodities of a given value, the values of all 
other commodities are measured. 2 The volume of the 
circulating medium in a country is determined by the 
value of the unit of measure of money on the one hand, 
and by the sum total of the exchange values of commodi 
ties, on the other. This quantity is modified by economy 
in the method of payment. 1 Since the quantity of money, 

David Ricardo: "On the Principles of Political Economy 
etc." p. 77. "Their value [of metals] [like that of all other 
fommodities], depends on the total quantity of labour necessary 
to obtain the metal, and to bring it to market." 

1. c. p. 77, 180, 181. 

1 Ricardo, 1. c. p. 421. "The quantity of money that can be 
employed in a country must depend on its value: if gold alone 
were employed for the circulation of commodities, n quantity 
would be required, one fifteenth only of what would be nece.s- 
eary, if silver were made use of for the same purpose." See 
also Ricnrdo s: "Proposals for nn Economical and Secure Cur 
rency," London, 1816, p. 80, where he says: "The amount of 
notes in c-iroulntion depends on the amount required for the 


cf a given value, which can be absorbed by circulation, is 
thus determined and since the value of money within 
the sphere of circulation mauifests itself only in its 
quantity, it follows that mere tokens of value, if issued 
in proportions determined by the value of money, may 
replace it in circulation, and in fact, "a currency is in 
its most perfect state when it consists wholly of paper 
money, but of paper money of an equal value with the 
gold which it professes to repi .asent." 1 So far Ricardo 
determines the volume of the circulating medium by the 
prices of commodities, assuming the value of money 
to be given ; money as a token of value means with him 
a token of a definite quantity of gold and not a mere 
worthless representative of commodities as was the case 
with Hume. 

When Ricardo suddenly gets off the straight path of 
his presentation and takes the very opposite view, he 
does so to turn his attention to the international circula 
tion of precious metals and thus brings confusion into 
the problem by introducing considerations that are for 
eign to the subject. Let us follow his own course of 
reasoning, and, in order to remove everything that is 
artificial and incidental, let us assume that the gold and 
silver mines are located in the interior of the countries 
in which the precious metals circulate as money. The 
only inference which follows from Ricardo s reasoning 

circulation of the country : which is regulated ... by 
the value of the standard [of money], the amount of payments, 
and the economy practised in effecting them." 

1 Ricardo, "Principles of Political Economy", p. 432. 


as so far developed, is that, the value of gold being 
given, the quantity of money in circulation will be de 
termined by the prices of commodities. Thus, at a 
given moment, the quantity of gold in circulation in a 
country is simply determined by the exchange value of 
the commodities in circulation. Let us suppose now 
that the sum total of these exchange values has declined 
either because there are less commodities produced at the 
old exchange values, or because, in consequence of an 
increased productivity of labor, the same quantity of 
commodities has a smaller value. Or, we may assume 
on the contrary that the sum total of exchange values 
has increased, either because the quantity of commod 
ities has increased while the cost of their production has 
remained the same, or because the value of the same 
or of a smaller quantity of commodities has risen in 
consequence of a diminished productivity of labor. What 
becomes in either case of the given quantity of metal 
in circulation? If gold is money merely because 
it is current as a medium of circulation; if it is 
compelled to remain in circulation like government legal 
fender paper money (and that is what Ricardo has in 
mind), then the quantity of money in circulation will 
rise above the normal level, as determined by the ex 
change value of the metal, in the former case, and fall 
below that level in the latter. Although possessing a 
value of its own, gold will become in the former case a 
token of a metal of lower exchange value than its 
own, and in the latter, a token of a metal of 
higher value. In the former case it will remain as a 
token of value less than its owe, in the latter greater than 


its own (again an abstract deduction from legal ten 
der paper money). In the former case it is the same 
as though commodities were estimated in a metal of 
lower value than gold, in the latter, as though they 
were estimated in a metal of higher value. In the former 
case, prices of commodities would rise therefore, in the 
latter they would fall. In either case the movement of 
prices, their rise or fall, would appear as the effect of a 
relative expansion or contraction of the volume of gold 
in circulation above or below the level corresponding to 
its own value, i. e. above or below the normal quantity 
which is determined by the proportion between its own 
value and that of the commodities in circulation. 

The same process would take place if the sum total 
of the prices of the commodities in circulation remained 
unchanged, while the volume of gold in circulation 
came to be below or above the right level : the former 
in case the gold coin worn out in the course of circula 
tion were not replaced by the production of a corre 
sponding quantity of gold in the mines ; the latter, if the 
output of the mines exceeded the requirements of cir 
culation. In either case it is assumed that the cost 
of production of gold or its value remain the same. 

To sum up : the money in circulation is at its normal 
level, when its volume is determined by its own bullion 
value, the exchange value of commodities being given. 
It rises above that level, bringing about a fall in the 
value of gold below its own bullion value and a rise of 
prices of commodities, whenever the sum total of the 
exchange values of commodities declines, or the output 
of gold from the mines increases. It sinks below its 


right level, leading to a rise of gold above its own 
bullion value and to a fall of prices of commodities, 
whenever the sum total of the exchange values of the 
commodities or the gold output of the mines is not suffi 
cient to replace the quantity of outworn gold. In either 
case the gold in circulation becomes a token of value 
greater or smaller than that it really possesses. It may 
become an appreciated or depreciated token of itself. As 
soon as all commodities would come to be estimated in 
gold of this new value and the general price level would 
accordingly rise or fall, the quantity of current gold 
would again answer the requirements of circulation (a 
consequence which Ricardo emphasizes with great pleas 
ure), but would be at variance with the cost of produc 
tion of the precious metals and, therefore, with their 
relation as commodities to all other commodities. Ac 
cording to the general Rieardian theory of exchange 
value, the rise of gold above its exchange value, i. e., above 
the value as determined by the labor-time contained in it, 
would cause an increase in the production of gold until 
the increased output of it would reduce its value to the 
proper magnitude. And in the same manner, a fall of gold 
below its value would cause a decline in its production 
until its value rose again to its proper magnitude. By 
these opposite movements the discrepancy between the 
bullion value of gold and its value as a medium of cir 
culation would disappear, the normal level of the vol 
ume of gold in circulation would be restored, and the 
price level would again correspond to the measure of 
value. These fluctuations in the value of gokl in circula 
tion would to the same extent affect gold ir the form of 


bullion, because by assumption, all gold that is not util 
ized as an article of luxury, is supposed to be in circula 
tion. Since gold itself may become, both as coin and bul 
lion, a token of value of greater or smaller magnitule 
than its bullion value, it is self understood that convert 
ible bank-notes in circulation have to share the same fate. 
Although bank-notes are convertible, i. e. their real value 
and nominal value agree, "the aggregate currency con 
sisting of metal and of convertible notes" may appre 
ciate or depreciate according as to whether it rises 01 
falls, for reasons already stated, above or below the level 
determined by the exchange value of the commodities in 
circulation and the bullion value of gold. Inconvertib e 
paper money, has, from this point of view, only that 
advantage as against convertible paper money, that it 
may depreciate in a two-fold manner. It may fall be 
low the value of the metal which it is supposed to repre 
sent, because it has been issued in too great quantity, 
or it may depreciate because the metal it represents has 
itself fallen in value. This depreciation, not of paper 
as compared with gold, but of gold and paper together, 
or of the aggregate currency of a country, is one of the 
principal discoveries of Ricardo, which Lord Overstone 
and Co. pressed into their service and made a funda 
mental principle of Sir Robert Peele s Bank legislation 
of 1844 and 1845. 

What should have been proven was that the price of 
commodities or the value of gold depends on the 
quantity of gold in circulation. The proof consists in 
the assumption of what is to be proven, viz. that any 
quantity of the precious metal employed as money 


must become a medium of circulation or coin, and there 
by a token of value for the commodities in circulation, 
no matter in what proportion to its own intrinsic value 
and no matter what the total value of those commodities 
may be. To put it differently, the proof consists in 
overlooking all the other functions which money per 
forms besides its function of a medium of circulation. 
When hard pressed, as in his controversy with Bosan- 
quet, Kicardo, completely under the influence of the 
phenomenon of depreciated tokens of value caused by 
their quality, takes recourse to dogmatic assurances. 1 

If Kicardo had built up this theory by abstract reason 
ing, as we have done it here, without introducing con 
crete facts and incidental matters which only distract 
his attention from the main question, its hollowness 
would be striking. But he takes up the entire subject 
in its international aspect. It will be easy to prove, 
however, that the apparent magnitude of scale does not 
make his fundamental ideas less diminutive. 

His first proposition was as follows: the volume of 
metallic currency is normal when it is determined by 
the total value of the commodities in circulation esti 
mated in its bullion value. Expressed so as to apply 
to international conditions, it reads thus: in a normal 
ftate of circulation every country possesses a quantity 
of money "according to the state of its commerce and 

1 David Ricardo, "Reply to Mr. Bosanquet a Practical Obser 
vations, etc." p. 40. "That commodities would rise or fall in 
price, in proportion to the increase or diminution of money, / 
assume as a fact which is incontrovertible." 


wealth." Money circulates at a value corresponding 
to its real value or to its cost of production, i. e. it has 
the same value in all countries. 1 That being the case, 
"there could be no temptation offered to either for their 
importation or exportation." 2 There would thus be 
established a balance of currencies between the different 
countries. The normal level of a national currency is 
now expressed in terms of an international balance of 
currencies, which practically amounts to the statement 
that nationality does not change anything in a universal 
economic law. We have reached again the same fatal 
point as before. How is the normal level disturbed? 
Or, speaking in terms of the new terminology, how is 
the international balance of currencies disturbed? Or, 
how does money cease to have the same value in all 
countries? Or, finally, how does it cease to pass at its 
own value in every country? We have seen that the 
normal level was disturbed by an increase or decrease 
of the volume of money in circulation while the total 
value of commodities remained the same; or, because 
the quantity of money in circulation remained the same 
while the exchange values of commodities rose or fell. 
Tn the same manner, the international level, determined 
by the value of the metal itself, is disturbed by an in 
crease in the quantity of gold in a country brought 

1 David Ricardo, "The High Price of Bullion,"- etc. "Money 
would have the same value in all countries." p. 4. In his 
Political Economy Ricardo modified this statement, but not in 
a way to affect what has been said here. 

J 1. c. p. 3-4. 

about by the discovery of new gold mines, 1 or by an in 
crease or decrease of the total exchange-value of the 
circulating commodities in any particular country. Just 
as in the former case the output of the precious metals 
decreased or increased according as to whether it was 
necessary to contract or expand the currency and thereby 
to lower or raise prices, so are the same effects produced 
now by export and import from one country to another. 
In the country in which prices would rise or the value 
of gold would fall below the bullion value in conse 
quence of a redundant currency, gold would be de 
preciated, and the prices of commodities would rise as 
compared with other countries. Gold would, therefore, 
be exported, while commodities would be imported, and 
vice versa. Just as in the former case the output of 
gold, so now the import or export of gold and, with it, 
the rise or fall of prices of commodities would continue 
until, as we would have said before, the right value 
relation would be restored between the metal and com 
modities, or as we shall say now, the international 
balance of currencies would be restored. Just as in the 
former case the production of gold increased or de 
creased because gold stood above or below its value, 
so now the international migration of gold would take 
place for the same reason. Just as in the former case, 
every change in the production of the circulating metal 
affected its quantify and, thereby, prices, so would the 
same effect be produced now by international import 
and export. As soon as the relative values of gold and 

p. 4. 


commodities or the normal quantity of currency would 
be restored, no further production would take place in 
the former case, and no further export or import in the 
latter, except in so far as would be necessary to replace 
outworn coin and to meet the demand of manufacturers 
of articles of luxury. It follows "that the temptation to 
export money in exchange for goods, or what is termed 
an unfavorable balance of trade, never arises but from a 
redundant currency." 3 "The exportation of the coin 
is caused by its cheapness, and is not the effect, but the 
cause of an unfavourable balance." 2 Since the increase 
or decrease in the production of gold in the former case 
and the importation or exportation of gold in the latter, 
take place only whenever its volume rises above or sinks 
below its normal level, i. e. whenever gold appreciates 
or depreciates in comparison with its bullion value, or 
whenever prices of commodities are too high or too low ; 
it follows that every such movement works as a correc 
tive, 3 since, through the resultant expansion or contrac 
tion of the currency, prices are restored to their true 
level : in the former case this level represents the balance 
between the respective values of gold and of commodi 
ties ; in the latter, the international balance of currencies. 
To put it in other words: money circulates in different 
countries only in so far as it circulates as coin in every 
country. Money is but coin and all the gold existing in 
a country must therefore enter circulation, i. e. it can 

Ricardo, 1. c., p. 11-12. 
2 Ricardo, 1. c., p. 14. 
M. c., p. 17. 


rise above or fall below its value as a token of value. 
Thus we safely land again, by the round-about way of 
this international complication, at the simple dogma 
which constituted our starting point. 

With what violence to actual facts Ricardo has to ex 
plain them in the sense of his abstract theory, a few 
illustrations will suffice to show. He maintains, e. g. 
that in years of poor crops, which happened frequently 
in England during 1800-1820, gold is exported not 
because corn is needed and gold as money is at all times 
an effectual means of purchase in the world market, but 
because gold is in such cases depreciated in its value as 
compared with other commodities and, therefore, the 
currency of the country in which there has been a failure 
of crops is depreciated with respect to other national 
currencies. "In consequence of a bad harvest, a country 
having been deprived of a part of its commodities . . . 
the currency which was before at its just level . . . 
become (s) redundant," and prices of all commodities 
rise in consequence. 1 Contrary to this paradoxical in- 

1 Ricardo, 1. c., p. 74-75. "England, in consequence of a bad 
harvest, would corne under the case of a country having been 
deprived of a part of its commodities, and, therefore, requiring 
a diminished amount of circulating medium. The currency 
which was before equal to her payments would now become 
super-abundant and relatively cheap, in proportion. . . of 
her diminished production; the exportation of this sum, there 
fore, would restore the value of her currency to the value of the 
currencies of other countries." His confusion of money and 
commodity, and of money and coin borders on the ludicrous in 
the following passage: "If we can suppose that after an un- 


terpretation it has been proven statistically that from 
1793 to the present time, whenever England had a bad 
harvest the available supply of currency not only did 
not become superabundant, but became inadequate and 
that, therefore, more money circulated and had to cir 
culate on such occasions. 1 

In the same manner, Ricardo maintained, with refer 
ence to Napoleon s Continental System and the English 
Blockade Decree, that the English exported gold instead 
of commodities to the Continent, because their money 
was depreciated with respect to the money on the Con 
tinent, that their commodities were, therefore, more 
bigh priced, which made it a more profitable commercial 
speculation to export gold than goods. According to 
him England was a market in which commodities were 
dear and money was cheap, while on the Continent 

favorable harvest, when England has occasion for an unusual 
importation of corn, another nation is possessed of a super 
abundance of that article, but has no wants for any commodity 
whatever, it would unquestionably follow that such nation 
would not export its corn in exchange for commodities: but 
neither would it export corn for money, as that is a commodity 
which no nation ever wants absolutely, but relatively." 1. c., 
p. 75. Pushkin in his hero poem makes the father of his hero 
incapable of comprehending that commodities are money. But 
that money is a commodity, the Russians have understood from 
times of yore as is proven not only by the English corn import* 
in 1838-1842, but by the entire history of their commerce. 

1 Conf. Thomas Tooke, "History of Prices," and James Wil- 
Bon, "Capital, Currency and Banking." (The latter work is a 
reprint of a series of articles which appeared in the London 
Economist in 1844, 1845 and 1847.) 


commodities were cheap and money was dear. The trou 
ble, according to an English writer, was "the ruinously 
low prices of our manufactures and of our colonial 
productions under the operation ... of the Con 
tinental System during the last six years of the war. 
. . . The prices of sugar and coffee, for instance, on 
the Continent, computed in gold, were four or five times 
higher than their prices in England, computed in bank 
notes. I am speaking ... of the times in which 
the French chemists discovered sugar in beet-root, and 
a substitute for coffee in chicory; and when the Eng 
lish grazier tried experiments upon fattening oxen with 
treacle and molasses of the times when we took pos 
session of the island of Heligoland, in order to form 
there a depot of goods to facilitate, if possible, the 
smuggling of them into the north of Europe ; and when 
the lighter descriptions of British manufactures found 
their way into Germany through Turkey. . . . Al 
most all the merchandise of the world accumulated in 
our warehouses, where they became impounded, except 
when some small quantity was released by a French 
License, for which the merchants at Hamburgh and 
Amsterdam had, perhaps, given Napoleon such a sum 
as forty or fifty thousand pounds. They must have been 
strange merchants ... to have paid so large a sum 
for liberty to carry a cargo of goods from a dear market 
to a cheap one. What was the ostensible alternative the 
merchant had? . . . Either to buy coffee at fid. 
a pound in bank-notes, and send it to a place where it 
would instantly sell at 3s. or 4s. a pound in gold, or to 
buy gold with bank-notes at 5 an ounce, and send it 


to a place where it would be received at 3 17s. 
an ounce. . . . It is too absurd, of course, to say 
. . . that the gold was remitted instead of the cof 
fee, as a preferable mercantile operation. . . . 
There was not a country in the \w*v-. t? ^rMch so 
large a quantity of desirable goods could be obtained, ia 
return for an ounce of ge*ld, as in England. . . . 
Bonaparte . . . was constantly examining the 
English Price Current. ... So long as he saw that 
gold was dear and coffee was ch2ap in England, he was 
satisfied that his Continental System worked well/ 1 

At the very time when Ricardo first formulated his 
theory of money, and the Bullion Committee embodied 
it in its parliamentary report, namely in 1810, a ruin 
ous fall of prices of air English commodities as com 
pared with those of 1808 &nd 1809 took place, while 
gold rose in value accordingly. Only agricultural prod 
ucts formed an exception, because their importa 
tion from abroad met with obstacles and their domestic 
supply was decimated by unfavorable crop conditions.- 
Ricardo so utterly failed to comprehend the role of 
precious metals as an international means of payment, 
that in his testimony before the Committee of the House 
of Lords in 1819 he could say "that drains for exporta 
tion would cease altogether so soon as cash payments 

James Deacon Hume: "Letters on the Corn Laws." Lon 
don, 1834, p. 29-31. [Letter by H. B. T. on the Corn Laws and 
on the Rights of the Working Classes. Transl.] 

"Thomas Tooke, "History of Prices," etc. London, 1848, 
p. 110. 


ehould be resumed, and the currency be restored to its 
metallic level." He died just in time, on the very eve 
of the crisis of 1825, which belied his prophesies. 

The time when Ricardo wrote was generally little 
adapted for the observation of the function of precious 
metals as world money. Before the introduction of the 
Continental System, the balance of trade had almost 
always been in favor of England, and while that system 
lasted, the commercial intercourse with the European 
continent was too insignificant to affect the English 
rate of exchange. The money transmissions were mostly 
of a political nature and Ricardo seems to have utterly 
failed to grasp the part which subsidy payments played 
at that time in English gold exports. 1 

Among the contemporaries of Ricardo who formed 
the school which adopted his economic principles, 
JAMES MILL was the most important one. He at 
tempted to work out Ricardo s theory of money on the 
basis of simple metallic circulation, without the irrele 
vant international complications which served Ricardo 
to hide the inadequacy of his theory, and without any 
controversial regard for the operations of the Bank of 
England. His main arguments are as follows : 

<r By value of money, is here to be understood the 
proportion in which it exchanges for other commodities, 
or the quantity of it which exchanges for a certain 
quantity of other things. . . . It is the total quan 
tity of the money in any country, which determines 
what portion of that quantity shall exchange for a cer- 

1 Conf. W. Blake s above quoted "Observations etc." 


tain portion of the goods or commodities of that country. 
If we suppose that all the goods of the country are on 
one side, all the money on the other, and that they are 
exchanged at once against one another, it is evident 
. . . that the value of money would depend wholly 
upon the quantity of it. It will appear that the case 
is precisely the same in the actual state of the facts. 
The whole of the goods of a country are not exchanged 
at once against the whole of the money ; the goods are 
exchanged in portions, often in very small portions, 
and at different times, during the course of the whole 
year. The same piece of money which is paid in one 
exchange to-day, may be paid in another exchange to 
morrow. Some of the pieces will be employed in a 
great many exchanges, some in very few, and some, 
which happen to be hoarded, in none at all. There 
will, amid all these varieties, be a certain average num 
ber of exchanges, the same which, if all the pieces had 
performed an equal number, would have been performed 
by each ; that average we may suppose to be any number 
we please; say, for example, ten. If each of the pieces 
of the money in the country perform ten purchases, 
that is exactly the same thing as if all the pieces were 
multiplied by ten, and performed only one purchase 
each. The value of all the goods in the country is equal 
to ten times the value of all the money. ... If 
the quantity of money instead of performing ten ex 
changes in the year, were ten times as great, and per 
formed only one exchange in the year, it is evident that 
whatever addition were made to the whole quantity, 
would produce a proportional diminution of value, in 

each of the minor quantities taken separately. As the 
quantity of goods, against which the money is all ex 
changed at once, is supposed to be the same, the value 
of all the money is no more, after the quantity is aug 
mented, than before it was augmented. If it is supposed 
to be augmented one-tenth, the value of every part, that 
of an ounce for example, must be diminished one-tenth. 
. . . In whatever degree, therefore, the quantity of 
money is increased or diminished, other things remain 
ing the same, in that same proportion, the value of 
the whole, and of every part, is reciprocally diminished 
or increased. This, it is evident, is a proposition uni 
versally true. Whenever the value of money has either 
risen or fallen (the quantity of goods against which it 
is exchanged and the rapidity of circulation remaining 
the same), the change must be owing to a corresponding 
diminution or increase of the quantity; and can be owing 
to nothing else. If the quantity of goods diminish, while 
the quantity of money remains the same, it is the same 
thing as if the quantity of money had been increased ;" 
and vice versa. . . . "Similar changes are produced 
by any alteration in the rapidity of circulation. . . . 
An increase in the number of these purchases has the 
same effect as an increase in the quantity of money; 
a diminution the reverse. ... If there is any por 
tion of the annual produce which is not exchanged at all, 
as what is consumed by the producer ; or which it not 
exchanged for money ; that is not taken into the account, 
because what is not exchanged for money is in the 
Bame state with respect to the money, as if it did not 
exist. . . . Whenever the coining of money ... 


is free, its quantity is regulated by the value of the 
metal. . . . Gold and silver are in reality com 
modities . . . It is cost of production . . . 
which determines the value of these, as of other ordi 
nary productions/ * 

The whole wisdom of Mill resolves itself into a series 
of arbitrary and absurd assumptions. He wishes to 
prove that the price of commodities or the value of 
money is determined by "the total quantity of the money 
in any country." Assuming that the quantity and the 
exchange value of the commodities in circulation remain 
unchanged and that the same be true of the rapidity of 
circulation and of the value of precious metals as deter 
mined by the cost of production, and assuming at the 
same time that the quantity of the metallic currency 
increases or decreases in proportion to the quantity of 
money existing in a country, it becomes really "evident" 
that what was to have been proven has been assumed. 
Mill falls, moreover, into the same error as Hume by 
assuming that use-values and not commodities with a 
given exchange value are in circulation, and that 
vitiates his statement, even if we grant all of his "as 
sumptions." The rapidity of circulation may remain the 
same ; this may also be true of the value of the precious 
metals and of the quantity of commodities in circulation ; 
and yet a change in the exchange value of the latter 
may require now a larger and now a smaller quantity 
of money for their circulation. Mill sees that a part of 

* James Mill : "Elements of Political Economy." [I-ondon, 
1821, p. 95-101 passim. Transl.] 


the money in a country is in circulation, while another is 
idle. With the aid of a most absurd average calculation 
he assumes that, although it really appears to be differ 
ent, yet all the gold in a country does circulate. As 
suming that ten million silver thalers circulate in 
a country twice a year, there could be twenty 
million such coins in circulation, if each circulated but 
once. And if the entire quantity of silver to be found 
in a country in any form amounts to one hundred mil 
lion thalers, it may be supposed that the entire one 
hundred million can enter circulation, if each piece of 
money should circulate once in five years. One could 
as well assume that all the money of the world circulate 
in Hempstead, but that each piece of money instead of 
being employed three times a year, is employed once in 
3,000,000 years. The one assumption is as relevant as 
the other for the purpose of determining the relation 
between the sum total of prices of commodities and the 
volume of currency. Mill feels that it is a matter of 
decisive importance to him to bring the commodities 
in direct contact not with the money in circulation, but 
with the entire supply of money existing in a country. 
He admits that "the whole of the goods of a country are 
not exchanged at once against the whole of the money," 
but that the goods are exchanged in different portions 
and at different times of the year for different portions 
of money. To do away with this difficulty he assumes 
that it does not exist. Moreover, this entire idea 
of direct contact of commodities and money and direct 
exchange is a mere abstraction from the movement of 
simple purchase and sale or the function of money as a 

_ 255 

means of purchase. Already in the movement of money 
as a means of payment, commodity and money cease to 
appear simultaneously. 

The commercial crises of the nineteenth century, 
namely, the great crises of 1825 and 1836, did not re 
sult in any new developments in the Ricardian theory of 
money, but they did furnish new applications for it. 
They were no longer isolated economic phenomena, such 
as the depreciation of the precious metals in the six 
teenth and seventeenth centuries which interested 
Hume, or the depreciation of paper money in 
the eighteenth and early nineteenth centuries which 
confronted Ricardo; they were the great storms 
of the world market in which the conflict of all 
the elements of the capitalist process of pro 
duction discharge themselves, and whose origin and 
remedy were sought in the most superficial and abstract 
sphere of this process, the sphere of money circulation. 
The theoretical assumption from which the school of 
economic weather prophets proceeds, comes down in 
the end to the illusion that Ricardo discovered the laws 
governing the circulation of purely metallic currency. 
The only thing that remained for them to do was to sub 
ject to the same laws the circulation of credit and bank 
note currency. 

The most general and most palpable phenomenon in 
commercial crises is the sudden, general decline of prices 
following a prolonged general rise. The general decline 
of prices of commodities may be expressed as a rise in 
the relative value of money with respect to all commodi 
ties, and the general rise of prices as a decline of the 


relative value of money. In either expression the phe 
nomenon is described but not explained. Whether I 
put the question thus : explain the general periodic rise 
of prices followed by a general decline of the same, or 
formulate the same problem by saying: explain the 
periodic decline and rise of the relative value of money 
with respect to commodities ; the different wording leaves 
the problem as little changed as would its translation 
from German into English. Ricardo s theory of money 
was exceedingly convenient, because it lends a tautology 
the semblance of a statement of causal connection. 
Whence comes the periodic general fall of prices ? From 
the periodic rise of the relative value of money. 
Whence the general periodic rise of prices? From the 
periodic decline of the relative value of money. It 
might have been stated with equal truth that the peri 
odic rise and fall of prices is due to their periodic rise 
and fall. The problem itself is stated under the as 
sumption that the intrinsic value of money, i. e., its 
value as determined by the cost of production of precious 
metals remains unchanged. If it is more than a tau 
tology then it is based on a misconception of the most 
elementary principles. If the exchange value of A 
measured in terms of B, declines, we know that this 
may be caused by a decline of the value of A as much 
as by a rise of the value of B ; the same being true of 
the case of a rise of the exchange value of A measured 
in terms of B. The tautology once admitted as a state 
ment of cause, the rest follows easily. A rise of prices 
of commodities is caused by a decline of the value of 
money and a decline of the value of money is caused, 



as we know from Ricardo, by a redundant currency, 
i. e., by a rise of the volume of currency over the level 
determined by its own intrinsic value and the intrinsic 
value of the commodities. In the same manner, the gen 
eral decline of prices of commodities is explained by the 
rise of the value of money above its intrinsic value in 
consequence of an inadequate currency. Thus, prices 
rise and fall periodically, because there is periodically 
too much or too little money in circulation. Should 
a rise of prices happen to coincide with a contracted cur 
rency, and a fall of prices with an expanded one, it may 
be asserted in spite of those facts that in consequence 
of a contraction or expansion of the volume of commod 
ities in the market, which can not be proven statistically, 
the quantity of money in circulation has, although not 
absolutely, yet relatively increased or declined. We have 
seen that according to Ricardo these universal fluctua 
tions must take place even with a purely metallic cur 
rency, but that they balance each other through their 
alternations; thus, e. g., an inadequate currency causes 
a fall of prices, the fall of prices leads to the export of 
commodities abroad, this export causes again an import 
of gold from abroad, which, in its turn, brings about a 
rise of prices; the opposite movement taking place in 
case of a redundant currency, when commodities are im 
ported and money is exported. But, since in spite of 
these universal fluctuations of prices which are in per 
fect accord with Ricardo s theory of metallic currency, 
their acute and violent form, their crisis-form, belongs 
to the period of advanced credit, it is perfectly clear 
that the issue of bank-notes is not exactly regulated by 


the laws of metallic currency. Metallic currency has 
its remedy in the import and export of precious metals 
which immediately enter circulation and thus, by their 
influx or efflux, cause the prices of commodities to fall 
or rise. The same effect on prices must now be exerted 
by banks by the artificial imitation of the laws of me 
tallic currency. If gold is coming in from abroad it 
proves that the currency is inadequate, that the value 
of money is too high and the prices of commodities too 
low, and, consequently, that bank notes must be put in 
circulation in proportion to the newly imported gold. 
On the contrary, notes have to be withdrawn from cir 
culation in proportion to the export of gold frcm the 
country. That is to say, the issue of bank notes must 
be regulated by the import and export of the precious 
metals or by the rate of exchange. Ricardo s false as 
sumption that gold is only coin, and that therefore ail 
imported gold swells the currency, causing price; to ri.-e, 
while a 1 ! exported gold reduces the currency leading to 
a fall oC prices, this theoretical assumption is turned 
into a practical experiment of putting in every ca-e an 
amount of currency in circulation equal to the amount 
of goV 1 in existence. Lord Overstone ( Jie banker Jones 
Lcyd), Colonel Torrens, Norman, Clay, Arbuthnot and 
a ln?t of other writers, known in England as the ad- 
herc-ris of the "currency principle," not only preached 
this doctiine, but with the aid of Sir Robert Peel suc 
ceeded in 1844 and 1845 in making it the basis of the 
present English and Scotch bank legislation. Its ig- 
nominous failure, theoretical as well as practical, fol 
lowing upon experiments on the largest national scale. 


can be treated only after we take tip the theory of credit. 1 
So much can be seen, however, that the theory of Ricardo 
which isolates money in its fluent form of currency, ends 
by ascribing to the ebbs and tides in the supply of 
precious metals an influence on bourgeois economy such 
as the believers in the superstitions of the monetary sys 
tem had never dreamt of. Thus did Ricardo, who pro 
claimed paper currency as the most perfect form of 
money, become the prophet of the bullionists. 

After Hume s theory or the abstract opposition to the 

A few months before the outbreak of the commercial crisis 
of 1857, a committee of the House of Commons was in session 
to inquire into the effect of the bank-laws of 1844 and 1845. 
Lord Overstone, the theoretical father of these laws, delivered 
himself of this boast in his testimony before the committee: 
"By strict and prompt adherence to the principles of the act of 
1844, everything has passed off with regularity and ease; the 
monetary system is safe and unshaken, the prosperity of the 
country is undisputed, the public confidence in the wisdom of 
the act of 1844 is daily gaining strength ; and if the committee 
wish for further practical illustration of the soundness of the 
principles on which it rests, or of the beneficial results which it 
has assured, the true and sufficient answer to the committee is, 
look around you ; look at the present state of trade of the coun 
try, look at the contentment of the people; look at the wealth 
and prosperity which pervades every class of the community; 
and then, having done so, the committee may be fairly called 
upon to decide whether they will interfere with the continuance 
of an act under which these results have been developed." 
Thus did Overstone blow his own horn on the fourteenth of 
July, 1857 ; on the twelfth of November of the same year the 
Ministry had to suspend on its own responsibility the wonder 
ful law of 1844. 


monetary system was thus developed ic its ultimate con 
clusions, Steuart s concrete conception of money was fi 
nally restored to its rights by THOMAS TOOKE. 1 
Tooke arrives at his principles not from any theory, but 
by a conscientious analysis of the history of prices of 
commodities from 1793 to 1856. In the first edition of 
his History of Prices which appeared in 1823, Tooke is 
still under the complete influence of the Ricardian the 
ory, and vainly tries to reconcile it with actual facts. 
His pamphlet "On the Currency," which appeared after 
the crisis of 1825 might even be considered as the first 
consistent presentation of the views which were later 
given the force of law by Overstone. Continued studies 
in the history of prices forced him, however, to the con 
clusion that the direct connection between prices and the 
volume of currency, as it is pictured by the theory, is a 
mere illusion; that the expansion and contraction of 
currency which takes place while the value of the pre 
cious metals remains unchanged, is always the effect 
but never the cause of price fluctuations ; that the circu 
lation of money is in any event but a secondary move 
ment; and that money assumes quite different forms in 
the actual process of production in addition to that of 
a circulating medium. His detailed investigations be 
long to a sphere outside of that of simple metallic cir 
culation and can be discussed here as little as the inves 
tigations of WILSON and FULLARTON which belong 

1 Tooke was entirely ignorant of Steuart s work, as may be 
seen from his "History of Prices for 1839-1847," London, 1848. 
where he reviews the history of the theories of money. 


to the same class. 1 None of these writers takes a one-sided 
view of money, but treat it in its various aspects; the 
treatment, however, is mechanical, without an attempt 
to establish an organic connection either between these 
various aspects themselves, or between them and the 
combined system of economic categories. They fall, 
therefore, into the error of confusing money as distin 
guished from medium of circulation with capital or 
even with commodity, although they are forced else 
where to differentiate it from both. 1 When gold, e. g., 
is shipped abroad, it practically means that capital is 
sent abroad, but the same thing takes place when iron, 
cotton, grain, or any other commodity is exported. Both 
are capital and are distinguished not as capital, but as 
money and commodity. The function of gold as the 
international medium of exchange springs, therefore, 

* Tooke s most important work besides the "History of Prices" 
which his co-worker Newmarch published in six volumes, is 
"An Inquiry into the Currency Principle, the Connection of the 
Currency with Prices" etc., 2nd edition, London, 1844. Wil 
son s book we have already quoted. Finally there is to be men 
tioned John Fullarton s "On the Regulation of Currencies," 2d 
edition, London, 1845. 

1 "We ought to ... distinguish . . . between gold 
. . . as merchandise, t. e. as capital, and gold. . . as cur 
rency" (Tooke, "An Inquiry into the Currency Principle, etc." 
p. 10). "Gold and silver may be counted upon to realize OB 
their arrival nearly the exact sum required to be provided. . . 
gold and silver possess an infinite advantage over all other de 
scription of merchandize . . . from the circumstance of 
being universally in use as money. . . It is not in tea, coffee, 
sugar or indigo that debts, whether foreign or domestic, are 


not from its being capital, but from its specific char 
acter of money. Similarly, when gold, or bank notes in 
its place, circulate in the home trade as means of pay 
ment, they constitute capital at the same time. But 
they could not be replaced by capital in the form of com 
modities, as has been demonstrated very palpably by 
crises, for instance. That is to say, it is the fact that 
gold is distinguished from commodities in its capacity 
of money and not in that of capital, that makes it the 
means of payment. Even when capital is exported di 
rectly as capital, as, e. g., when it is done for the pur 
pose of lending abroad a certain amount on interest, it 
depends on circumstances, whether it will be exported 
in the form of commodities or in that of gold, and if in 
the latter form, it is due to the specific destination of 
the precious metals as distinguished from commodities 
to serve as money. In general, these writers do not con 
sider money in its abstract form, as it is developed with 
in the sphere of simple circulation of commodities, and 
as it spontaneously grows out of the relation of the cir 
culating commodities. As a result, they constantly 

usually contracted to be paid, but in coin ; and the remittance, 
therefore, either in the identical coin designated, or in bullion 
which can be promptly turned into that coin through the mint 
or market of the country to which it is sent, must always afford 
to the remitter, the most certain, immediate, and accurate 
means of affecting this object, without risk of disappointment 
from the failure of demand or fluctuation of price." ( Fuller- 
ton, 1. c. p. 132-133.) "Any other article (except gold or sil 
ver) might in quantity or kind be beyond the usual demand of 
the country to which it is sent." (Tooke: "An Inquiry, etc.") 


vacillate between the abstract forms of money which dis 
tinguish it from commodity and those forms of it be 
neath which are concealed concrete relations, such as 
capital, revenue, etc. 1 

1 The transformation of money into capital we shall consider 
tn the third chapter which treats of capital and forms the end 
of the first book. 


Critique of Political Economy. 1 


The subject of our discussion is first of all material 
production by individuals as determined by society, nat 
urally constitutes the starting point. The individual 
and isolated hunter or fisher who forms the starting 

introduction was first published in the Neue Zeit (see 
Translator s Preface, p. 5) of March 7, 14 and 21, 1903, by 
Karl Kantsky, with the following explanation: 

"This article has been found among the posthumous papers 
of Karl Marx. It is a fragmentary sketch of a treatise that 
was to have served as an introduction to his main work, which 
he had been writing for many years and whose outline was 
clearly formed in his mind. The manuscript is dated August 


point with Smith and Ricardo, belongs to the insipid 
illusions of the eighteenth century. They are Robin- 
sonades which do not by any means represent, as stu 
dents of the history of civilization imagine, a reaction 
against over-refinement and a return to a misunderstood 
natural life. They are no more based on such a natural 
ism than is Rosseau s "contrat social," which makes nat 
urally independent individuals come in contact and have 
mutual intercourse by contract. They are the fiction 
and only the aesthetic fiction of the small and great 
Robinsonades. They are, moreover, the anticipation of 
"bourgeois society," which had been in course of de- 

23, 1857. ... As the idea is very often indicated only in 
fragmentary sentences, 1 have taken the liberty of introducing 
here and there changes in style, insertions of words, etc. . 

. A mere reprint of the original would have made it un 
intelligible. . . Not all the words in the manuscript are 
legible. . . . 

"Wherever there could be no doubt as to the necessity of 
corrections, I did so without indicating them in the text; in 
other cases I put all insertions in brackets. Wherever I air. 
not certain as to whether I have deciphered a word correctly, I 
have put an interrogation point after it; other changes are 
specially noted. In all other respects this is an exact reprint 
of the original, whose fragmentary and incomplete passage* 
serve to remind us only too painfully of the many treasures of 
thought which went down to the grave with Marx, treasures 
which would have sufficed for generations if Marx had not so 
anxiously avoided giving to the world any of his ideas until hf 
had tested them repeatedly from every conceivable point ol 
view and had given them a wording that would be incontro 
vertible. In spite of its fragmentary character it opens before 
us a wealth of new points of view." 


velopment since the sixteenth century and made gi 
gantic strides towards maturity in the eighteenth. In 
this society of free competition the individual appears 
free from the bonds of nature, etc., which in former 
epochs of history made him a part of a definite, limited 
human conglomeration. To the prophets of the eigh 
teenth century, on whose shoulders Smith and Ricardo 
are still standing, this eighteenth century individual, 
constituting the joint product of the dissolution of the 
feudal form of society and of the new forces of produc 
tion which had developed since the sixteenth century, 
appears as an ideal whose existence belongs to the past; 
not as a result of history, but as its starting point. 

Since that individual appeared to be in conformity 
with nature and [corresponded] to their conception of 
human nature, [he was regarded] not as a product of 
history, but of nature. This illusion has been charac 
teristic of every new epoch in the past. Steuart, who, as 
an aristocrat, stood more firmly on historical ground, 
contrary to the spirit of the eighteenth century, escaped 
this simplicity of view. The further back we go into 
history, the more the individual and, therefore, the 
producing individual seems to depend on and constitute > 
a part of a larger whole : at first it is, quite naturally, 
the family and the clan, which is but an enlarged family ; 
later on, it is the community growing up in its different 
forms out of the clash and the amalgamation of clans. 
It is but in the eighteenth century, in "bourgeois 
society," that the different forms of social union con 
front the individual as a mere means to his private ends, 
as an outward necessity. But the period in which this 


/ i 

rt{ \S4i\i* \ 
view of the isolated individual becomes /.vr<il<at, is the 

very one in which the interrelations of hociety (general 
from this point of view) have reached the highest state 
of development. Man is in the most literal sense of the 
word a zoon politikon, not only a social animal, but an 
animal which can develop into an individual only in 
(society. Production by isolated individuals outside of 
\ society something which might happen as an excep- 
I tion to a civilized man who by accident got into the 
| wilderness and already dynamically possessed within 
Vhimself the forces of society is as great an absurdity 
.as the idea of the development of language without in- 
jdividuals living together and talking to one another. We 
need not dwell on this any longer. It would not be neces 
sary to touch upon this point at all, wore not the vagary 
which had its justification and sense with the people of 
the eighteenth century transplanted in all earnest into 
the field of political economy by Ba&tiat, Carey, Proud- 
hon and others. Proudhon and others naturally find it 
very pleasant, when they do not know the historical 
origin of a certain economic phenomenon, to give it a 
quasi historico-philosopohical explanation by going into 
mythology. Adam or Prometheus hit upon the scheme 
cut and dried, whereupon it was adopted, etc. Nothing 
is more tediously dry than the dreaming loctts com- 

T Whenever we speak, therefore, of production, we al- 

I ways have in mind production at a certain stage of social 

^jlevelopment, or production by social individuals. Hence, 

it might seem that in order to speak of production at 

all, we must either trace the historical process of de- 


velopment through its various phases, or declare at the 
outset that we are dealing with a certain historical pe 
riod, as, e. g., with modern capitalistic production which, 
as a matter of fact, constitutes the subject proper of 
this work. But all stages of production have certain 
landmarks in common, common purposes. Production 
in general is an abstraction, but it is a rational abstrac 
tion, in so far as it singles out and fixes the commonj 
features, thereby saving us repetition. Yet these gen-* 
eral or common features discovered by comparison con 
stitute something very complex, whose constituent ele 
ments have different destinations. Some of these ele 
ments belong to all epochs, others are common to a 
few. Some of them are common to the most modern as 
well as to the most ancient epochs. No production is 
conceivable without them ; but while even the most com 
pletely developed languages have laws and conditions in 
common with the least developed ones, what is charac 
teristic of their development are the points of departure 
from the general and common. The conditions which 
generally govern production must be differentiated in 
order that the essential points of difference be not lost 
sight of in view of the general uniformity which is due 
to the fad that the subject, mankind, and the object, 
nature, remain the same. The failure to remember this 
one fact is the source of all the wisdom of modern 
economists who are trying to prove the eternal nature 
and harmony of existing social conditions. Thus they 
say, e. g., that no production is possible without some 
instrument of production, let that instrument be only 
the hand; that none is possible without past accumu- 


lated labor, even if that labor consist of mere nkill 
which has been accumulated and concentrated in the 
hand of the savage by repeated exercise. Capital is, 
among other things, also an instrument of production, 
also past impersonal labor. Hence capital is a universal, 
eternal natural phenomenon; which is true if we disre 
gard the specific properties which turn an "instrument 
of production" and "stored up labor" into capital. The 
entire history of production appears to a man like Carey, 
e. g., a? a malicious perversion on the part of govern 

If there is no production in general, there is 
also no general production. Production is always 
some special branch of production or an aggregate, 
as, e. g., agriculture, stock raising, manufactures, etc. 
But political economy is not technology. The connec 
tion between the general destinations of production at a 
given stage of social development and the particular 
forms of production, is to be developed elsewhere (later 

Finally, production is not only of a special kind. It 
is always a certain body politic, a social personality that 
is engaged on a larger or smaller aggregate of branches 
of production. The connection between the real pro 
cess and its scientific presentation also falls outside of 
the scope of this treatise. [We must thus distinguish 
between] production in general, special branches of 
production and production as a whole. 

It is the fashion with economists to open their works 
with a general introduction, which is entitled "produc- 


tion" (see, e. g., John Stuart Mill) and deals with the 
general "requisites of production." 

This general introductory part treats or is supposed 
to treat: 

1. Of the conditions without which production is im 
possible, i. e., of the most essential conditions of pro 
duction. As a matter of fact, however, it dwindles down, 
as we shall see, to a few very simple <J Bfinitions, which 
flatten out into shallow tautologies; 

2. Of conditions which further production more or 
less, as, e. g., Adam Smith s [discussion of] a progres 
sive and stagnant state of society. 

In order to give scientific value to what serves with 
him as a mere summary, it would be necessary to study 
the degree of productivity by periods in the development 
of individual nations; such a study falls outside of the 
scope of the present subject, and in so far as it does be 
long here is to be brought out in connection with the 
discussion of competition, accumulation, etc. The com 
monly accepted view of the matter gives a general an 
swer to the effect that an industrial nation is at the 
height of its production at the moment when it reaches 
its historical climax in all respects. Or, that certain 
races, climates, natural conditions, such as distance from 
the sea, fertility of the soil, etc., are more favorable to 
production than others. That again comes down to the 
tautology that the facility of creating wealth depends on 
the extent to which its elements are present both sub 
jectively and objectively. As a matter of fact a nation is 
at its industrial height so long as its main object is not 


gain, but the process of gaining. In that respect the 
Yankees stand above the English. 

But all that is not what the economists are really after 
in the general introductory part. Their object is rather 
to represent production in contradistinction to dis- 
tribution see Mill, e. g. as subject to eternal laws in- 
dependent of history, and then to substitute bourgeois 
relations, in an underhand way, as immutable natural 
laws of_BOciejjL-fc- abeirapto*^ This is the more or less 
conscious aim of the entire proceeding. On the con 
trary, when it comes to distribution, mankind is sup 
posed to have indulged in all sorts of arbitrary action 
Quite apart from the fact that they violently break the 
ties which bind production and distribution together, so 
much must be clear from the outset : that, no matter how 
greatly the systems of distribution may vary at different 
stages of society, it should be possible here, as in the case 
of production, to discover the- common features and to 
confound and eliminate all historical differences in 
formulating general human laws. E. g., the slave, the 
serf, the wage-worker all receive a quantity of food, 
which enables them to exist as slave, serf, and wage- 
worker. The conqueror, the official, the landlord, the 
monk, or the levite, who respectively live on tribute, 
taxes, rent, alms, and the tithe, all receive [a part] 
of the social product which is determined by laws differ- 
<-nt from those which determine the part received by the 
slave, etc. The two main points which all economists 
place under this head, are: first, property; second, t)ie 
protection of the latter by the administration of justice. 


police, etc. The objections to these two points can be 
stated very briefly. 

1. All production is appropriation of nature by the 
individual within ancl through; ^definite form of society . 
In that sense it is a tautology to say that property (ap 
propriation) is a condition of production. But it be 
comes ridiculous, when from that one jumps at once to 
a definite form of property, e. g. private property (which 
implies, besides, as a prerequisite the existence of an op 
posite form, viz. absence of property). History points 
rather to common property (e. g. among the Hindoos, 
Slavs, ancient Celts, etc.) as the primitive form, which 
still plays an important part at a much later period as 
communal property. The question as to whether 
wealth grows more rapidly under this or that form of 
property, is not even raised here as yet. But that there 
can be no such a^thing as production, nor, consequently, 
society, where property does not exist in any form. Js a 
tautology^ Appropriation which does not appropriate is 
a contradictio in subjecto. 

2. Protection of property, etc. Reduced to their real 
meaning, these comrnonplaces express more than what 
their preachers know, namely, that every form of pro-\\ 

duction creates its own legal relations, forms of govern- " 
ment, ejc. The crudity and the shortcomings of the 
conception lie in the tendency to see but an accidental re 
flective connection in what constitutes an organic union. 
The bourgeois economists have a vague notion that it is 
better to carry on production under the modern police, 
than it was, e. g. under club-law. They forget that 
club law is also law, and that the right of the stronger 


continues to exist in other forms even under their "gov 
ernment of law." 

When the social conditions corresponding to a certain 
stage of production are in a state of formation or disap 
pearance, disturbances of production naturally arise, 
although differing in extent and effect. 

To sum up: all the stages of production have cer 
tain destinations in common, which we generalize in 
thought ; but the so-called general conditions of all pro 
duction are nothing but abstract conceptions which do 
not go to make up any real stage in the history of produc 


Before going into a further analysis of production, it 

r is necessary to look at the various divisions which econ- 

N^ omists put side by side with it. The most shallow con- 

XSception is as follows: By production, the members of 

^3 society appropriate (produceTlmcT" shape) the products 

^ of nature to human wants; distribution determines the 

/proportion in which the individual participates in this 
production ; "yo^flng" bring" him the particular products 
\* into which he wishes to turn the quantity secured by 
him through distribution; finally, through consumption 
the products become objects of use and enjoyment of in 
dividual appropriation. Production yields goods adopt 
ed to our needs ; distribution distributes them accord 
ing to social laws ; exchange distributes further what has. 
already been distributed, according to individual wants; 


finally, in consumption the product drops out of the 
social movement, becoming the direct object of the in 
dividual want which it serves and satisfies in use. 
Production thus appears as the starting point ; consump 
tion as the final end; and distribution and exchange as 
the middle; the latter has a double aspect, distribution 
being defined as a process carried on by society, while 
exchange, as one proceeding from the individual. In 
production the person is embodied in things, in [con 
sumption 1 ] things are embodied in persons ; in distribu 
tion, society assumes the part of go-between of produc 
tion and consumption in the form of generally prevailing 
rules ; in exchange this is accomplished by the accidental 
make-up of the individual. 

> Distribution determines what proportion (quantity) 
of the products the individual is to receive ; exchange de 
termines the products in which the individual desires to 
receive his share allotted to him by distribution. 

Production, distribution, exchange, and consumption 
thus form a perfect connection, production standing for 
the general, distribution and exchange for the special, 
and consumption for the individual, in which all are 
joined together. To be sure this is a connection, but it 
does not go very deep. Production is determined [ac 
cording to the economists] by universal natural laws, 
while distribution depends on social chance: distribution 
can, therefore, have a more or less stimulating effect on 
production: exchange lies between the two as a formal 
( ?) social movement, and the final act of consumption 

1 The original reads "person." 


which is considered not only as a final purpose, but also 
as a final aim, falls, properly, outside of the scope of 
economics, except in so far as it reacts on the starting 
point and causes the entire process to begin all over 

The opponents of the economists whether econo- 
mists themselves or not who reproach them with tear 
ing apart, like barbarians, what is an organic whole, 
either stand on common ground with them or are below 
them. Nothing is more common than the charge that 
the economists have been considering production as an 
end in itself, too much to the exclusion of everything else. 
The same has been said with regard to distribution. 
This accusation is itself based on the economic concep 
tion that distribution exists side by side with production 
as a self-contained, independent sphere. Or [they are 
accused] that the various factors are not treated by them 
in their connection as a whole. As though it were the 
text books that impress this separation upon life and not 
life upon the text books: and the subject at issue were 
a dialectic balancing of conceptions and not an analysis 
of real conditions. 

a. Production is at the same time also consumption. 
Twofold consumption, subjective and objective. The in 
dividual who develops his faculties in production, is also 
expending them, consuming them in the act of produc 
tion, just as procreation is in its way a consumption of 
vital powers. In the second place, production is con 
sumption of means of production which are used and 
used up and partly (as e. g. in burning) reduced tfl 
their natural elements. The same is true of the con- 


sumption of raw materials which do not remain in their 
natural form and state, being greatly absorbed in the 
process. The j*_"*- flf prorhiptkm is^ thpr Q fnrpj in all its 
aspects an act of consumption as well. But this is ad 
mitted by economists. Production as directly identical 
with consumption, consumption as directly coincident 
with production, they call productive consumption. This 
identity of production and consumption finds its ex 
pression in Spinoza s proposition, Determinatio est nega- 
tio. But this definition of productive consumption is re 
sorted to just for the purpose of distinguishing between 
consumption as identical with production and consump 
tion proper, which is defined as its destructive counter 
part. Let us then consider consumption proper. 

Consumption is directly also production, just as in na 
ture the consumption of the elements and of chemical 
matter constitutes production of plants. It is clear, 
that in nutrition, e. g., which is but one form of con 
sumption, man produces his own body; but it is equally 
true- of every kind of consumption, which goes to pro 
duce the human being in one way or another. [It is] 
consumptive production. But, say the economists, this 
production which is identical with consumption, is a 
second production resulting from the destruction of the 
product of the first. In the first, the producer trans 
forms himself into things; in the second, things are 
transformed into human beings. Consequently, this 
consumptive production although constituting a direct 
unity of production and consumption differs essentially 
from production proper. The direct unity in which pro 
duction coincides with consumption and consumption 




#w I O 

with production, does not interfere with their direct 

Production is thus at the same time consumption, and 
consumption is at the same time production. Each is 
directly its own counterpart. But at the same time an 
intermediary movement goes on between the two. Produc 
tion furthers consumption by creating material for the 
latter which otherwise would lack its object. But con 
sumption in its turn furthers production, by providing 
for the products the individual for whom they are 
products. The product receives its last finishing touches 
in consumption. A railroad on which no one rides, 
which is, consequently not used up, not consumed, is but 
a potential railroad, and not a real one. Without pro- 
duction, no consumption ; but, on the other hand, with- 
out consumption, no production ; since production would 
then be without a purpose. Consumption produces 

In the first place, in that the product first becomes a 
real product in consumption ; e. g., a garment becomes 
a real garment only through the act of being worn ; a 
dwelling which is not inhabited, is really no dwelling; 
consequently, a product as distinguished from a mere 
natural object, proves to be such, first becomes a product 
in consumption. Consumption gives the product the 
finishing touch by annihilating it, since a product is the 
[result] of production not only as the material embodi 
ment of activity, but also as a mere object for the active 

y In the second place, consumption produces produc 
tion by creating the necessity for new production, i. e. 


/v / 

by providing the ideal, inward, impelling cause which 
constitutes the prerequisite of production. Consump 
tion furnishes the impulse for production as well as its 
object, which plays in production the part of its guiding 
aim. It is clear that while production furnishes the 
material object of consumption, consumption provides 
the ideal object of production, as its image, its want, its 
impulse and its purpose. It furnishes the object of 
production in its subjective form. No wants, no produc 
tion. But consumption reproduces the want. 

In its turn, production^ 

First, furnishes consumption 1 with its material, its 
object. Consumption without an object is no consump 
tion, hence production works in this direction by pro 
ducing consumption. 

Second. But it is not only the object that production 
provides for consumption. It gives consumption its 
definite outline, its character, its finish. Just as con 
sumption gives the product its finishing touch as a 
product, production puts the finishing touch on consump 
tion. For the object is not simply an object in general, 
but a definite object, which is consumed in a certain 
definite manner prescribed in its turn by production. 
Hunger is hunger; but the hunger that is satisfied with 
cooked meat eaten with fork and knife is a different kind 
of hunger from the one that devours raw meat with the 
aid of hands, nails, and teeth. Not only the object of 
consumption, but also the manner of consumption is 
produced by production; that is to say, consumption is 

1 The manuscript reads "production." 


created by production not only objectively, but also sub 
jectively. Production thus creates the consumers. 

Third. Production not only supplies the want with 
material, but supplies the material with a want. When 
consumption emerges from its first stage of natural 
crudeness and directness and its continuation in that 
state would in itself be the result of a production still 
remaining in a state of natural crudeness it is itself 
furthered by its object as a moving spring. The want 
of it which consumption experiences is created by its 
appreciation of the product. The object of art, as well 
as any other product, creates an artistic and beauty- 
enjoying public. Production thus produces not only an 
object for the individual, but also an individual for the 

Induction thus produces consumption : first, by fur- 
nishing the^latter with material! second, by determin 
ing the manner of consumption; third, by creating in 
consumers a want for its products as objects of con 
sumption. It thus produces the object, the manner, and 
the moving spring of consumption. In the same man 
ner, consumption [creates] the disposition of the pro 
ducer by setting (?) him up as an aim and by stimulat 
ing wants. The identity of consumption and production 
thus appears to be a three fold one. 

First, direct identity : production is consumption ; con 
sumption is production. Consumptive production. 
Productive consumption. Economists call *>oth productive 
consumption, but make one distinction by calling the 
former reproduction, and the latter productive consump 
tion. All inquiries into the former deal >ith productive 


and unproductive labor; those into the latter treat of 
productive and unproductive consumption. 

Second. Each appears as the means of the other and as 
" being brought about by tha-other. which is expressed 
as their mutual interdependence ; a relation, by virtue of 
which they appear as mutually connected and indis 
pensable, yet remaining outside of each other. 

Production creates the material as the outward ob 
ject of consumption; consumption creates the want as 
the inward object, the purpose of production. With 
out production, no consumption; without consumption, 
no production; this maxim figures ( ?) in political econ 
omy in many forms. 

~ Third. Production is not only directly consumption 
y and consumption directly production ; nor is production 
merely a means of consumption and consumption the 
purpose of production. In other words, not only does 
each furnish the other with its object; production, the 
material object of consumption; consumption, the ideal 
c-bject of production. On the contrary, either one is 
/not only directly the other, not (?) only a means of fur- 
j Jthering the other, but while it is taking place, creates the 
y other as such for itself (?). Consumption completes 
the act of production by giving the finishing touch to 
the product as such, by destroying the latter, by break 
ing up its independent material form; by bringing to 
a state of readiness, through the necessity of repetition, 
the disposition to produce developed in the first act of 
production; that is to say, itjs not only the concluding 
act through which the product becomes a product, but 
also [the one] through which the producer becomes a 


producer. On the other hand, production produces con 
sumption, by determining the manner of consumption, 
and further, by creating the incentive for consumption, 
the very ability to consume, in the form of want. This 
latter identity mentioned under point 3, is much dis 
cussed in political economy in connection with the treat 
ment of the relations of demand and supply, of objects 
and wants, of natural wants and those created by society. 
Hence, it is the simplest matter with a Hegelian to 
treat production and consumption as identical. And 
this has been done not only by socialist writers of fiction 
but even by economists, e. g. Say ; the latter maintained 
that if we consider a nation as a whole, or mankind in 
abstracio her production is at the same time her con 
sumption. Storch pointed out Say s error by calling 
attention to the fact that a nation does not entirely con 
sume her product, but also creates means of produc 
tion, fixed capital, etc. To consider society as a single 
individual is moreover a false mode of speculative reason 
ing. With an individual, production and consumption 
appear as different aspects of one act. The important 
point to be emphasized here is that if production and 
consumption be considered as activities of one individual 
or of separate individuals, they appear at any rate as as 
pects of one process in which production forms the actual 
starting point and is, therefore, the predominating factor. / 
Consumption, as a natural necessity, as a want, con 
stitutes an internal factor of productive activity, but 
the latter is the starting point of realization and. there 
fore, its predominating factor, the act into which the 
entire process resolves itself in the end. The individuai 


produces a certain article and turns again into himself 
by consuming it; but he returns as a productive and a 
self -reproducing individual. Consumption thus appears 
as a factor of production. 

In society, however, the relation of the producer to his 
product, as soon as it is completed, is an outward one, and 
the return of the product to the individual depends on 
his relations to other individuals. He does not take im 
mediate possession of it. Nor does the direct appropria 
tion of the product constitute his purpose, when he pro 
duces in society. Between the producer and the product 
distribution steps in, which determines by social laws 
his share in the world of products; that is to say, dis 
tribution steps in between production and consumption. 

Does distribution form an independent sphere stand 
ing side by side with and outside of production? 

b. Production and Distribution. In perusing the 
common treatises on economics one can not help being 
struck with the fact that everything is treated there 
twice ; e. g., under distribution, there figure rent, wages, 
interest, and profit ; while under production we find land, 
labor, and capital as agents of production. As regards 
capital, it is at once clear that it is counted twice : first, 
as an agent of production ; second, as a source of income ; 
as determining factors and definite forms of distribution, 
interest and profit figure as such also in production, since 
they are forms, in which capital increases and grows, and 
are consequently factors of its own production. Interest 
and profit, as forms of distribution, imply the existence 
of capital as an agent of production. They are forms of 
distribution which have for their prerequisite capital as 


an agent of production. They are also forms of repro 
duction of capital. 

In the same manner, wages is wage-labor when con 
sidered under another head ; the definite character which 
labor has in one case as an agent of production, appears 
in the other as a form of distribution. If labor were not 
fixed as wage-labor, its manner of participation in dis 
tribution 1 would not appear as wages, as is the case e. g. 
under slavery. Finally, rent to take at once the most de 
veloped form of distribution by means of which landed 
property receives its share of the products, implies the 
existence of large landed property (properly speakingj 
agriculture on a large scale) as an agent of production, 
and not simply land, no more than wages represents 
simply labor. The relations and methods of distribu 
tion appear, therefore, merely as the reverse sides of 
the agents of production. An individual who partici 
pates in production as a wage laborer, receives his share 
of the products, i. e. of the results of production, in the 
form of wages. The subdivisions and organization ol 
distribution are determined by the subdivisions and or* 
ganization of production. Distribution is itself a 
product of production, not only in so far as the material 
goods are concerned, since only the results of production 
can be distributed ; but also as regards its form, since the 
definite manner of participation in production deter 
mines the particular form of distribution, the form undo 
which participation in distribution takes place. It i? 

1 The manuscript reads "production." 


quite an illusion to place land under production, rent HU- 
der distribution, etc. 

Economists, like Kicardo, who are accused above ai? 0f 
having paid exclusive attention to production, define dis 
tribution, therefore, as the exclusive subject of political 
economy, because they instinctively 1 regard the forms of 
distribution as the clearest forms in which the agents 
of production find expression in a given society. 

To the single individual distribution naturally ap 
pears as a law established by society determining his 
position in the sphere of production, within which he 
produces, and thus antedating production. At the out 
set the individual has no capital, no landed property. 
From his birth he is assigned to wage-labor by the 
social process of distribution. But this very condition 
of being assigned to wage-labor is the result of the ex 
istence of capital and landed property as independent 
agents of production. 

From the point of view of society as a whole, distri 
bution seems to antedate and fco determine production 
in another way as well, as a pre-economic fact, so to say. 
A conquering people divides the land among the con 
querors establishing thereby a certain division and form 
of landed property and determining the character of 
production ; or, it turns the conquered people into slaves 
and thus makes slave labor the basis of production. Or, 
a nation, by revolution, breaks up large estates into small 
parcels of land and by this new distribution imparts to 

1 The German text reads "instruktiv," which I take to b? a 
misprint of "instinktiv." Translator. 

production a new character. Or, legislation prepetuate* 
land ownership in large families or distributes labor as 
an hereditary privilege and thus fixes it in castes. 

In all of these cases, and they are all historic, it is 
not distribution that seems to be organized and deter 
mined by production, but on the contrary, production by 

In the most shallow conception of distribution, the 
latter appears as a distribution of products and to that 
extent as further removed from and quasi-independent 
of production. But before distribution means distribu- 
it is first, a distribution of the means 
and second, what is practically another 

wording of the same fact, it is a distribution of the mem 
bers of society among the various kinds of production 
(the subjection of individuals to certain conditions of 
production) . The distribution of products is manifestly 
a result of this distribution, which is bound up with the 
process of production and determines the very organiza 
tion of the latter. To treat of production apart from the 
distribution which is comprised in it, is plainly an idle 
abstraction. Conversely, we know the character of the 
distribution of products the moment we are given the 
nature of that other distribution which forms originally 
a factor of production. Ricardo, who was concerned 
with the analysis of production as it is organized in mod 
ern society and who was the economist of production par 
excellence, for that very reason declares not production 
but distribution as the subject proper of modern econo 
mics. We have here another evidence of the insipidity 
of the economists who treat production as an eternal 

truth, and banish history to the domain of distribution. 

What relation to production this distribution, which 
has a determining influence on production itself, as 
sumes, is plainly a question which falls within the 
province of production. Should it be maintained that 
at least to the extent that production depends on a cer 
tain distribution of the instruments of production, dis 
tribution in that sense precedes production and con 
stitutes its prerequisite; it may be replied that produc 
tion has in fact its prerequisite conditions, which form 
factors of it. These may appear at first to have a nat 
ural origin. By the very process of production they are 
changed from natural to historical, and if they appear- \. 
during one period as a natural prerequisite of produc 
tion, they formed at other periods its historical result. 
Within the sphere of production itself they are under 
going a constant change. E. g., the application of ma 
chinery produces a change in the distribution of the in 
struments of production as well as in that of products, 
and modern land ownership on a large scale is as much 
the result of modern trade and modern industry, as that 
of the application of the latter to agriculture. 

All of these questions resolve themselves in the last 
instance to this : How do general historical conditions 
affect production and what part does it play at all in 
the course of history? It is evident that this question 
can be taken up only in connection with the discussion 
and analysis of production. 

Yet in the trivial form in which these questions are 
raised above, they can be answered just as briefly. In 
the case of all conquests three ways lie open. The con- 


quering people may impose its own methods of produc 
tion upon the conquered (e. g. the English in Ireland in 
the nineteenth century, partly also in India) ; or, it may 
allow everything to remain as it was contenting itself 
with tribute (e. g. the Turks and the Romans) ; or, the 
two systems by mutually modifying each other may re 
sult in something new, a synthesis (which partly resulted 
from the Germanic conquests). In all of these con 
quests the method-Qjf prndup.tipj. be it of the conquerors, 
the conquered, or the one resulting from a combination 
of both, determinon fhf Tintnr" of 1% pw distribution 
which comes into play. Although the latter appears 
now as tne prerequisite condition of the new period of 
production, it is in itself but a product of production, 
not of production belonging to history in general, but of 
production relating to a definite historical period. The- 
Mongols with their devastations in Russia e. g. acted in 
accordance with their system of production, for which 
sufficient pastures on large uninhabited stretches of 
country are the main prerequisite. The Germanic bar 
barians, with whom agriculture carried on with the aid 
of serfs was the traditional system of production and who 
were accustomed to lonely life in the country, could in 
troduce the same conditions in the Roman provinces so 
much easier since the concentration of landed property 
which had taken place there, did away completely with 
the older systems of agriculture. There is a prevalent 
tradition that in certain periods robbery constituted the 
only source of living. But in order to be able to plunder, 
there must be something to plunder, i. e. there must be 


production. 1 And even the method of plunder is deter 
mined by the method of production. A stockjobbing na 
tion 2 e. g. can not be robbed in the same manner as a 
nation of shepherds. 

In the case of the slave the instrument of production 
is robbed directly. But then the production of the coun 
try in whose interest he is robbed, must be so organized 
as to admit of slave labor, or (as in South America, etc.) 
a system of production must be introduced adapted to 

Laws may perpetuate an instrument of production, e. 
g. land, in certain families. These laws assume an 
economic importance if large landed property is in har 
mony with the system of production prevailing in society, 
as is the case e. g. in England. In France agriculture 
had been carried on on a small scale in spite of the large 
estates, and the latter were, therefore, broken up by the 
Revolution. But how about the legislative attempt to 
perpetuate the minute subdivision of the land ? In spite 
of these laws land ownership is concentrating again. The 
effect of legislation on the maintenance of a system of 

1 Compare this with foot-note 1, on p. 34 of Capital, Hum- 
boldt edition, New York: 

"Truly comical is M. Bastiat, who imagines that the ancient 
Greeks and Romans lived by plunder alone. But when people 
plunder for centuries, there must always be something at hand 
for them to seize; the objects of plunder must be continually 
reproduced." K. Kautsky. 

* The English expression is used by Marx in his German 
original. Transl. 

~ 290 

distribution ana its resultant influence on production 
are to be determined elsewhere. 

c.. Exchange tmd Clirr" 1 "!? Circulation is but a 
certain aspect of exchange, or it may be denned as ex 
change considered as a whole. Since exchange is an in 
termediary factor between production and its dependent, 
distribution, on the one hand, and consumption, on the 
other; and since the latter appears but as a constituent 
of production, exchange is manifestly also a constituent 
part of production. 

In the first place, it is clear that the exchange of 
activities and abilities which takes place in the 
sphere of production falls directly within the 
latter and constitutes one of its essential elements. 
In the second place, the same is true of the 
exchange of products, in so far as it is a means 
of completing a certain product, designed for im 
mediate consumption. To that extent exchange consti 
tutes an act included in production. Thirdly, the so- 
called exchange between dealers and dealers 1 is by virtue 
of its organization determined by production, and is it 
self a species of productive activity. Exchange appears 
to be independent of and indifferent to production only 
in the last stage when products are exchanged directly 
for consumption. But in the first place, there is no ex- 

1 Marx evidently has in mind here a passage in Adam Smith s 
Wealth of Nations (vol. 2, ch. 2) in which he speaks of the cir 
culation of a country as consisting of two distinct parts: cir 
culation between dealers and dealers, and that between dealer* 
and consumers. The word dealer signifies here not only a mer 
chant or shopkeeper, but also a producer. K. Kautsky. 


change without a division of labor, whether natural or 
as a resnli of historical development ; secondly, private 
exchange implir 1 1 flifl mi llllll nf priritr prriVlnrfinn ; 
thirdly, the intensity of exchange, as well as its extent 
and character are determined by the degree of develop 
ment and orgaaiaatioH of production, as e. g. exchange 
between city and country, exchange in the country, in the 
city, etc. T^* gp f^r ipnrm i in ill II i jii i l i hi In 
directly included in or determined bv production. 

The result we arrive at is not that production, distri 
bution, exchange, and consumption are identical, but 
that they are all members of one entity, different sides 
of one unit. Production predominates not only over 
production itself in the opposite sense of that term, but 
over the other elements as well. With it the process 
constantly starts over again. That exchange and con 
sumption can not be the predominating elements is self 
evident. The same is true of distribution in the narrow 
sense of distribution of products; as for distribution in 
the sense of distribution of the agents of production, it 
is itself but a factor of production. A dejjnjif^form 
of ] production thus determines the [forms of] consump 
tion,^ stributionT^xcTJange mutual rela 
tions between these various elements. Of course, produc 
tion in its one-sidea /or/Tiis Tnits turn influenced by 
other elements; e. g. with the expansion of the market, 
i. e. of the sphere of exchange, production grows in 
volume and is subdivided to a greater extent. 

With a change in distribution, production undergoes a 
change ; as e. g. in the case of concentration of capital, 
of a change in the distribution of population in city and 



country, etc. Finally, the demands of consumption also 
influence production. A mutual interaction takes place 
between the various elements. Such is the case with 
every organic body.* 


X When we consider a given country from a politico- 
economic standpoint, we begin with its population, then 
analyze the latter according to its subdivision into classes, 
location in city, country, or by the sea, occupation in dif 
ferent branches of production ; then we study its exports 
and imports, annual production and consumption, prices 
of commodities, etc. fTt seems to be the correct pro 
cedure to commence with the real and concrete aspect of 
conditions as they are; in the case of political econ 
omy, to commence with population which is the basis and 
the author of the entire productive activity of society. 
Yet, on closer consideration it proves to be wrong. Pop 
ulation is an abstraction, if we leave out e. g. the classes 
of which it consists. These classes, again, are but an 
empty word, unless we know what are the elements on 
which they are based, such as wage-labor, capital, etc. 
Those imply, in their turn, exchange, division of labor, 
prices, etc. Capital, e. g. does not mean anything without 
wage-labor, value, money, price, etc. If we start out, 
therefore, with population, we do so with a chaotic con 
ception of the whole, and by closer analysis we will grad 
ually arrive at simpler ideas ; thus we shall proceed 
from the imaginary concrete to less and less complex ab 
stractions, until we get at the simplest conception. Thia 


onoe attained, we might start on our return journey until 
we would finally come back to population, but this time 
not as a chaotic notion of an integral whole, but as a rich 
aggregate of many conceptions and relations .j^. The 
former method is the one which political economy had 
adopted in the past at its inception. The economists of 
the seventeenth century, e. g., always started out with 
the living aggregate: population, nation, state, several 
states, etc., but in the end they invariably arrived, by 
means of analysis, at certain leading, abstract general 
principles, such as division of labor, money, value, etc. 
As soon as these separate elements had been more or less 
established by abstract reasoning, there arose the sys 
tems of political economy which start from simple con 
ceptions, such as labor, division of labor, demand, ex 
change value, and conclude with state, international ex 
change and world market. The latter is manifestly the 
scientifically correct method. The concrete is concrete, 
because it is a combination of many objects with different 
destinations, i. e. a unity of diverse elements. In our 
thought, it therefore appears as a process of synthesis, as 
a result, and not as a starting point, although it is the 
real starting point and, therefore, also the starting point 
of observation and conception.^ By the former method * 
the complete conception passes into an abstract defini 
tion; by the latter, the abstract definitions lead to the 
reproduction of the concrete subject in the course of 
reasoning. Hegel fell into the error, therefore, of con 
sidering the real as the result of self-coordinating, self- 
absorbed, and spontaneously operating thought, while 
the method of advancing from the abstract to the con- 


crete is but a way of thinking by which the concrete is 
grasped and is reproduced in our mind as a concrete. It 
is by no means, however, the process which itself gen 
erates the concrete. * The simplest economic category, 
say, exchange value, implies the existence of population, 
population that is engaged in production under certain 
conditions ; it also implies the existence of certain types 
of family, clan, or state, etc. It can have no other ex 
istence except as an abstract one-sided relation of an 
already given concrete and living aggregate. > 

As a category, however, exchange value leads an an 
tediluvian existence. And since our philosophic con 
sciousness is so arranged that only the image of the man 
that it conceives appears to it as the real man and the 
world as it conceives it, as the real world; it mistakes 
the movement of categories for the real act of produc 
tion (which unfortunately (?) receives only its impetus 
from outside) whose result is the world ; that is true 
here we have, however, again a tautology in so far as 
the concrete aggregate is a thought aggregate, in so far as 
the concrete subject of our thought is in fact a product 
of thought, of comprehension ; not, however, in the sense 
of a product of a self-emanating conception which works 
outside of and stands above observation and imagination, 
but of a mental consummation of observation and imagi 
nation. The whole, as it appears in our heads as a 
thought-aggregate, is the product of a thinking mind 
which grasps the world in the only way open to it, a wa^v 
which differs from the one employed by the artistic, re 
ligious, or practical mind. The concrete subject con 
tinues to lead an independent existence after it^ias been 


grasped, as it did before, outside of the head, so long as 
the head contemplates it only speculatively, theoretically. 
So that in the employment of the theoretical method 
[in political economy], the subject, society, must con 
stantly be kept in mind as the premise from which we 

But have these simple categories no independent his 
torical or natural existence antedating the more concrete 
ones? fa depend. For instance, in his Philosophy of 
Law Hegel rightly starts out with possession, as the 
simplest legal relation of individuals. But there is 
no such thing as possession before the family or the rela 
tions of lord and serf, which are a great deal more con 
crete relations, have come into existence. On the other 
hand, one would be right in saying that there are 
families and clans which only possess, but do not own 
things. The simpler category thus appears as a rela 
tion of simple family and clan communities with respect 
to property. In earlier society the category appears as 
a simple relation of a developed organism, but the con 
crete substratum from which springs the relation of pos 
session, is always implied. One can imagine an isolated 
savage in possession of things. But in that case pos 
session is no legal relation. It is not true that the family 
came as the result of the historical evolution of pos 
session. On the contrary, the latter always implies the 
existence of this "more concrete category of law. V Yet 
so much may be said, that the simple categories are the 
expression of relations in which the less developed con 
crete entity may have been realized without entering 
into the manifold relations and bearings which are 


mentally expressed in the concrete category; but when 
the concrete entity attains fuller development it will 
retain the same category as a subordinate relation. 

Money may exist and actually had existed in history 
before capital, or banks, or wage-labor came into exist 
ence. With that in mind, it may be said that the more 
simple category can serve as an expression of the pre 
dominant relations of an undeveloped whole or of the 
subordinate relations of a more developed whole, [rela 
tions] which had historically existed before the whole 
developed in the direction expressed in the more concrete 
category. In so far, the laws of abstract reasoning which 
ascends from the most simple to the complex, corre 
spond to the actual process of history. 

On the other hand, it may be said that there are highly 
developed but historically unripe forms of society in 
which the highest economic forms are to be found, such 
as co-operation, advanced division of labor, etc., arid yet 
there is no money in existence, e. g. Peru. 

In Slavic communities also, money, as well as ex 
change to which it owes its existence, does not appear 
at. all or very little within the separate communities, but 
it appears on their boundaries in their inter-communal 
traffic; in general, it is erroneous to consider exchange 
as a constituent element originating within the com 
munity. It appears at first more in the mutual relations 
between different communities, than in those between 
the members of the same community. Furthermore, al 
though money begins to play its part everywhere at an 
parly stage, it plays in antiquity the part of a pre 
dominant element only in one-sidedly developed nations, 


viz. trading nations, and even in most cultured an 
tiquity, in Greece and Rome, it attains its full develop 
ment, which constitutes the prerequisite of modern bour 
geois society, only in the period of their decay. Thus, 
this quite simple category attained its culmination in the 
past only at the most advanced stages of society. Even 
then it did not pervade (?) all economic relations ; in 
Rome e. g. at the time of its highest development taxes 
and payments in kind remained the basis. As a matter 
of fact, the money system was fully developed there only 
so far as the army was concerned ; it never came to dom 
inate the entire system of labor. 

Thus, although the simple category may have existed A 
historically before the more concrete one, it can attain its v 
complete internal and external development only in com 
plex ( ?) forms of society, while the more concrete cate 
gory has reached its full development in a less advanced 
form of society. 

Labor is quite a simple category. The idea of labor in < 
that sense, as labor in general, is also very old. Yet. \ 
"labor" thus simply defined by political economy is as 
much a modern category, as the conditions which have 
given rise to this simple abstraction. The monetary sys 
tem, e. g. defines wealth quite objectively, as a thing ( ?) 1 
in money. Compared with this point of view, it was 
a great step forward, when the industrial or commercial 
system came to see the source of wealth not in the object 
but in the activity of persons, viz. in commercial and in- 

1 Here two words in the manuscript can not be deciphered. 
They look like "answer sich" ("outside of itself ) . K. Kautsky. 


dustrial labor. But even the latter was thus considered 
only in the limited sense of a money producing activity. 
The physiocratic system [marks still further progress] 
in that it considers a certain form of labor, viz. agricul 
ture, as the source of wealth, and wealth itself not in 
the disguise of money, but as a product in general, as 
the general result of labor. But corresponding to the 
limitations of the activity, this product is still only a 
natural product. Agriculture is productive, land is the 
source of production par excellence. It was a tremendous 
advance on the part of Adam Smith to throw aside all 
limitations which mark wealth-producing activity and 
[to define it] as labor in general, neither industrial, nor 
commercial, nor agricultural, or one as much as the other. 
Along with the universal character of wealth-creating 
activity we have now the universal character of the 
object defined as wealth, viz. product in general, or labor 
in general, but as past incorporated labor. How diffi 
cult and great was the transition, is evident from the 
way Adam Smith himself falls back from time to time 
into the physiocratic system. Now, it might seem as 
though this amounted simply to finding an abstract ex 
pression for the simplest relation into which men have 
been mutually entering as producers from times of yore, 
no matter under what form of society. In one sense 
this is true. In another it is not. 

The indifference as to the particular kind of labor im 
plies the existence of a highly developed aggregate of dif 
ferent species of concrete labor, none of which is any 
longer the predominant one. So do the most general ab 
stractions commonly arise only where there is the highest 


concrete development, where one feature appears to be 
jointly possessed by many, and to be common to all. 
Then it can not be thought of any longer in one par 
ticular form. On the other hand, this abstraction of 
labor is but the result of a concrete aggregate of differ 
ent kinds of labor. The indifference to the particular 
kind of labor corresponds to a form of society in which \ 
individuals pass with ease from one kind of work to an- j 
other, which makes it immaterial to them what particu- i 
Jar kind of work may fall to their share. Labor has be- \ 
come here, not only categorically but really, a means 
of creating wealth in general and is no longer grown to 
gether with the individual into one particular destina 
tion. This state of affairs has found its highest develop 
ment in the most modern of bourgeois societies, the 
United States. It is only here that the abstraction of 
the category "labor," "labor in general," labor sans 
phrase, the starting point of modern political economy, 
becomes realized in practice. Thus, the simplest abstrac 
tion which modern political economy sets up as its start 
ing point, and which expresses a relation dating back to 
antiquity and prevalent under all forms of society, ap 
pears in this abstraction truly realized only as a category 
of the most modern society. It might be said that what 
appears in the United States as an historical product, 
viz. the indifference as to the particular kind of labor 
appears among the Kussians e. g. as a natural disposi 
tion. But it makes all the difference in the world 
whether barbarians have a natural predisposition which 
makes them applicable alike to everything, or whether 
civilized people apply themselves to everything. And, 


besides, this indifference of the Russians as to the kind 
of work they do, corresponds to their traditional practice 
of remaining in the rut of a quite definite occupation 
until they are thrown out of it by external influences. 

This example of labor strikingly shows how even the 
most abstract categories, in spite of their applicability to 
all epochs just because of their abstract character are 
by the very definiteness of the abstraction a product of 
historical conditions as well, and are fully applicable 
only to and under those conditions. 

The bourgeois society is the most highly developed and 
most highly differentiated historical organization of pro 
duction. The categories which serve as the expression 
of its conditions and the comprehension of its own or 
ganization enable it at the same time to gain an insight 
into the organization and the conditions of production 
which had prevailed under all the past forms of society, 
on the ruins and constituent elements of which it has 
arisen, and of which it still drags along some unsur- 
mounted remnants, while what had formerly been mere 
intimation has now developed to complete significance. 
The anatomy of the human being is the key to the 
anatomy of the ape. But the intimations of a higher 
animal in lower ones can be understood only if the 
y animal of the higher order is already known. The 
bourgeois economy furnishes a key to ancient economy, 
etc. This is, however, by no means true of the method of 
I those economists who blot out all historical differences 
and see the bourgeois form in all forms of society. One 
can understand the nature of tribute, tithes, etc., after 


one has learned the nature of rent. But they must not 
be considered identical. 

Since, furthermore, bourgeois society is but a form 
resulting from the development of antagonistic elements, 
some relations belonging to earlier forms of society are 
frequently to be found in it but in a crippled state or 
as a travesty of their former self, as e. g. communal 
property. While it may be said, therefore, that the 
categories of bourgeois economy contain what is true of 
all other forms of society, the statement is to be taken 
cum grano salis. They may contain these in a de 
veloped, or crippled, or caricatured form, but always es 
sentially different. The so-called historical develop 
ment amounts in the last analysis to this, that the last 
form considers its predecessors as stages leading up to 
itself and perceives them always one-sidedly, since it is 
very seldom and only under certain conditions that it is 
capable of self-criticism ; of course, we do not speak here 
of such historical periods which appear to their own con 
temporaries as periods of decay. The Christian religion 
became capable to assist us to an objective view of past 
mythologies as soon as it was ready for self-criticism to a 
certain extent, dynamei so-to-say. In the same way bour 
geois political economy first came to understand the 
feudal, the ancient, and the oriental societies as soon as 
the self-criticism of the bourgeois society had commenced. 
So far as bourgeois political economy has not gone into 
the mythology of purely ( ?) identifying the bourgeois 
system with the past, its criticism of the feudal system 
against which it still had to wage war resembled Christ- 


ian criticism of the heathen religions or Protestant criti 
cism of Catholicism. 

In the study of economic categories, as in the case 
I of every historical and social science, it must be borne in 
; mind that as in reality so in our mind the subject, in this 
case modern bourgeois society, is given and that the 
categories are therefore but forms of expression, mani 
festations of existence, and frequently but one-sided as 
pects of this subject, this definite society; and that, 
therefore, the origin of [political economy] as a science 
does not by any means date from the time to which it 
is referred as such. This is to be firmly held in mind 
because it has an immediate and important bearing on 
{he matter of the subdivisions of the science. 

For instance, nothing seems more natural than to 
start with rent, with landed property, since it is bound 
up with land, the source of all production and all ex 
istence, and with the first form of production in all 
more or less settled communities, viz. agriculture. But 
nothing would be more erroneous. Under all forms of 
society there is a certain industry which predominates 
over all the rest and whose condition therefore deter 
mines the rank and influence of all the rest. 

It is the universal light with which all the other colors 
are tinged and are modified through its peculiarity. It 
is a special ether which determines the specific gravity 
of everything that appears in it. 

Let us take for example pastoral nations (mere hunt 
ing and fishing tribes are not as yet at the point from 
which real development commences). They engage in a 
certain form of agriculture, sporadically. The nature 


of laisd-ownership is determined thereby. It is held in 
common and retains this form more or less according to 
the extent to which these nations hold on to traditions; 
such e. g. is land-ownership among the Slavs. Among 
nations whose agriculture is carried on by a settled popu 
lation the settled state constituting a great advance 
where agriculture is the predominant industry, such as 
in ancient and feudal societies, even the manufacturing 
industry and its organization, as well as the forms of 
property which pertain to it, have more or less the charac 
teristic features of the prevailing system of land owner 
ship; [society] is then either entirely dependent upon 
agriculture, as in the case of ancient Rome, or, as in 
the middle ages, it imitates in its city relations the forms 
of organization prevailing in the country. Even capital, 
with the exception of pure money capital, has, in the 
form of the traditional working tool, the characteristics 
of land ownership in the Middle Ages. 

The reverse is true of bourgeois society. Agriculture 
comes to be more and more merely a branch of industry 
and is completely dominated by capital. The same is 
true of rent. In all the forms of society in which land 
ownership is the prevalent form, the influence of the 
natural element is the predominant one. In those where 
capital predominates the prevailing element is the one 
historically created by society. Rent can not be under 
stood without capital, nor can capital, without rent. Cap 
ital ie the all dominating economic power of bourgeois 
society. It must form the starting point as well as the 
end *pd be developed before land-ownership is After 


each has been considered separately, their mutual rela 
tion must be analyzed. 

It would thus be impractical and wrong to arrange 
the economic categories in the order in which they were 
the determining factors in the course of history. Their 
order of sequence is rather determined by the relation 
which they bear to one another in modern bourgeois so 
ciety, and which is the exact opposite of what seems to be 
their natural order or the order of their historical de 
velopment. What we are interested in is not the place 
which economic relations occupy in the historical suc 
cession of different forms of society. Still less are we 
interested in the order of their succession "in idea" 
(Proudhon), which is but a hazy (?) conception of the 
course of history. We are interested in their organic 
connection within modern bourgeois society. 

The sharp line of demarkation (abstract precision) 
which so clearly distinguished the trading nations of an 
tiquity, such as the Phenicians and the Carthagenians, 
was due to that very predominance of agriculture. Cap 
ital as trading or money capital appears in that abstrac 
tion, where capital does not constitute as yet the pre 
dominating element of society. The Lombardians and 
the Jews occupied the same position among the agricul 
tural nations of the middle ages. 

As a further illustration of the fact that the same 
category pla} r s different parts at different stages of so 
ciety, we may mention the following: one of the latest 
forms of bourgeois society, viz. stock companies, appear 
also at its beginning in the form of the great chartered 
monopolistic trading companies. 


The conception of national wealth which is imper 
ceptibly formed in the minds of the economists of the 
seventeenth century, and which partly continues to be 
entertained by those of the eighteenth century, is that 
wealth is produced solely for the state, but that the 
power of the latter is proportional to that wealth. It was 
as yet an unconsciously hypocritical way in which wealth 
announced itself and its own production as the aim of 
modern states considering the latter merely as a means 
to the production of wealth. 

The order of treatment must manifestly be as follows : 
first, the general abstract definitions which are more or 
less applicable to all forms of society, but in the sense 
indicated above. Second, the categories which go to make 
up the inner organization of bourgeois society and con 
stitute the foundations of the principal classes ; capital, 
wage-labor, landed property ; their mutual relations ; city 
and country ; the three great social classes, the exchange 
between them; circulation, credit (private). Third, 
the organization of bourgeois society in the form of 
a state, considered in relation to itself; the "unproduc 
tive" classes ; taxes ; public debts ; public credit ; popula 
tion; colonies; emigration. Fourth, the international 
organization of production; international division of 
labor; international exchange; import and export; rate 
of exchange. Fifth, the world market and crises. 



Notes on the points to be mentioned here and not to be 
omitted : l 

1. War attains complete development before peace; 
how certain economic phenomena, such as wage-labor, 
machinery, etc., are developed at an earlier date through 
war and in armies than within bourgeois society. The 

/connection between productive force and the means of 
I communication is made especially plain in the case of 
i the army. 

2. The relation between the idealistic and realistic 
methods of writing history ; namely, the so-called history 
of civilization which is all a history of religion and states. 

Distribution (Verkehr) is used here in the sense of physi 
cal distribution of goods and not in sense of economic dis 
tribution of the shares of the products between the different 
factors of production. Translator. 

As the "notes" written down by Marx in the following eight 
paragraphs are extremely fragmentary, making translation in 
some cases impossible without a certain degree of interpreta 
tion, and as the original is not accessible in book-form, they are 
reproduced here in German for the benefit of the student who 
may feel interested in the original wording as it had been jotted 
down by Marx. 


In this connection sometning may be said of the differ 
ent methods hitherto employed in writing history. The 
so-called objective [method]. The subjective. (The 
moral and others). The philosophic. 

4. $robtthum, qSrobuftiondmittcl unb $r0bttftum8t>erltflt* 
niffe. 9Srobaftton8berljaltnt8 unb 5Berfd)r3t>erI)altntf?r 
Stoats nnb (vtgentlntmtfformert tm SJcrfjaltntS 311 ben 
N l>robtt!ttonu nnb aJerfeJjrSbetfifiltnifTen. ffiedjtSbet&alrmfi e. 

Stfotabene in begug auf ^unfte, bic Ijtet 311 erftwljnen un5 
nidjt betgeffen toetben biirfcn: 

1. cr ^ r i c g tft frii^cr augc6ilbct, toic bet gfrteben : 
[2Iu3iif ii^rcn Irdrc] bic SIrt, toic burd^ ben Srieg unb in 
ben ?Irmeen zc. gehriffe o!onomtf(^e SSer^dltnitfe lute 2o^n- 
arbeit, 3J?afc^tnerie zc. frii^er entlrtdfeU [toerben] al tm 
^nneren ber biirgerlidjen efeHfd^aft. ?lud^ ba SSer^altniS 
bon ^robiiftibfraft unb SSerfe^rSber^altntffen Irirb befonberS 
anfc^aulic^ in bet Sltmee. 

2. SSetljaltnig bet btS^ettgen tbealen efdjtdjtSfdjteibung 
3Ut realen. SJamentlic^ bte fogenonnte ^uUutgef^tc^te, bie 
aHe JReligtonSs unb (Staatengefcfjtdjte. 

S3ei bet elegenl^ett fann aud| ettoa gefagt metben itbec 
bte betfd^tebenen Sttten bee btSljerigen efd|tdtf(^tetbung. 
Sogenannte objeftibe. (Subjeftibe. (2JZotatt[^e unb anbete.) 

3. e!unbateg unb ^ettiateS. lleberb/mpt 
abgeleitete, iibetttagene, ntd^t utfpriingltc^e 
^robuftumSberfyaltmffe. ^iet [tft ba] Einfbtelen bet 
intetnationalen SSet^altntffe [gu be^anbeln]. 

4. SBottoiitfe iibet 2T2atettaltmu btefet STuffaffung. 
9?et^5Itnt gum natutQltftifd^en a^atettattymuS. 

5. Staleltif bet S3egriffe 5(?tobufttbltaft 


tmttel) unb ^robuftiong&erljaltmS, eine SMaleffif, beren 
ren^en $u beftimmen finb unb bie rcalcn ilnterfd]ieb nid)t 

6. 2>aS unegale 23erf)altni3 bcr (Sntttjidlung ber mate* 
rieQen ^robufrion ^um 23eifpiel 3111 fiinftlcrifdjen. lleber- 
I)aupt ift ber S3egriff be! gortfd)ritt< nidjt in bet 
lichen 9(bftra!tion 311 faffert. Sei ber fiunft x. ift biefe 
proportion nodj nirfjt fo njiifjtig unb fdiroicdg ^u faffen alts 
innerljalb praftifrfi^o^ialer 53er^dltni| ie fel&ft. ^um 53eifpie( 
bag 23ilbungDerf)tiltni6 ber 53ereinigten taaten ^u (Suropa 
Ser eigent(id) fdiiuterige ^un{t, ber I)ier ^u erortern iit 
aber ber, luie bie ^robuftiongDcrfjQltmffc al$ 9led)tiDerl)aIt- 
niffe in unglcirf)e (?) (?nt)uirilung trcten. SI(fo <5iun 93ei- 
fpiel ba 33crl)dltni^ be-3 romifften ^vioatred^t^ (im Slrimt- 
nalrcdjt unb offentliri>cn ift bol roeniger ber 
mobernen ^Srobuftion. 

7 Siefe ^luffafiung cr) d)etnt nl notfjiuenbige 
lung. Slbcr 33ercd)tigung be3 %u falls. Varia. ( 
l^eit unb anbcre nod).) (Oimutrfung ber 
mittel.) 2Ccltgcfd)id)te eiflcntfidy nidjt immer in ber 
(i}efcf)id)te ais rBeltgefd)id)t[Iid)e] SKefuItat. 

8. 2>er StuSflangSpunlt [ift] nntiirlid) bon ber Sftatur- 
beftimmtljeu [^u neljmen] ; fubjcftio unb objeftio, Stammc, 
Dlaffcn K. 

3. Secondary and tertiary. Conditions of production 
which have been taken over or transplanted; in general, 
those that are not original. Here [is to be treated] the 
effect of international relations. 

4. Objections to the materialistic character of this 
view. Its relation to naturalistic materialism. 

1 3m Original ift i Ulfir Va 
3m Original ift ;u kfrn rgtt. 


5. The dialectics of the conceptions productive 
force (means of production) and relation of produc 
tion, dialectics whose limits are to be determined 
and which does not do away with the concrete dif 

6. The unequal relation between the development 
of material production and art, for instance. In 
general, the conception of progress is not to be 
taken in the sense of the usual abstraction. In the 
case of art, etc., it is not so important and difficult 
to understand this disproportion as in that of practi 
cal social relations, e. g. the relation between edu 
cation in the United States and Europe. The really 
difficult point, jiowever, that is to be discussedjieje 
is that Qi_theunequal ( ?) development of relations 
of prqductiorj as legajjrelations^ As, e. g!,the con 
nection between Roman civil law (this is less true 
of criminal and public law) and modern production. 

7. This conception of development appears to 
imply necessity. On the other hand, justification of 
accident. Varia. (Freedom and other points). (The 
effect of means of communication). World history 
does not always appear in history as the result of 
world history. 

8. The starting point [is to be found] in certain 
facts of nature embodied subjectively and objective 
ly in clans, races, etc. 

It is well known that certain periods ofhighest 
development of _art_stand in no(direcQconnectipn 
with the general development of society, nor with 


the material basJS-aad-Jjhe^ skeleton structure of its 
organization. Witness the example of the Greeks 
as compared with the modern nations or even 
Shakespeare. As regards certain forms of art, as 
e. g. the epos, it is admitted that they can never 
be produced in the world-epoch making form as soon 
as art as such comes into existence ; in other words, 
that in the domain of art certain important forms of 
it are possible only at a low stage of its develop 
ment. If that be true of the mutual relations of 
different forms of art within the domain of art 
itself, it is far less surprising that the same is true 
o7 the relation of art as a whole to the general de 
velopment of society. The difficulty lies only in the 
general formulation of these contradictions. No 
sooner are they specified than they are~gxplained. 
Let us take for instance the relation of Greek art 
and of that of Shakespeare s time to our own. It is 
a well known fact that Greek mythology was not 
only the arsenal of Greek art, but also the very 
ground from which it had sprung. Is the vie_w_of 
nature and of social relations which shaped Greek 
imagination and Greek jart| possible in the age of 
automatic machinery, and railways, and locomotives, 
and electric telegraphs? Where does Vulcan come 
in as against Roberts & Co. ; Jupiter, as against the 
lightning rodj and Hermes, as against the^Qgdit 
MobJlie/? Ajj_jrnythology masters and dominates 
an4 shapes the forces of nature in and througjT the 
imagination ; hence it disappears as soon as man 


gains mastery over the forces of nature. What be 
comes of the uoddess .b ame side by side with Print 
ing House Square ? Greek art presupposes the exis 
tence of Greek mythology, i. e. that nature andeyen 
thejorm of society are wrought up in popular fancy 
in an unconsciously artistic jashipn. That is its 
material. Not, however, any mythology taken at 
random, nor any accidental unconsciously artistic 
elaboration of nature (including under the latter all 
objects, hence [also] society). Egyptian mythology 
could never be the soil or womb which would give 
birth to Greek art. But in any event [there had to 
be] a mythology. In no event [could Greek art 
originate] in a society which excludes any mytho 
logical explanation of nature, any mythological at 
titude towards it and which requires from the artist 
an imagination free from mythology. 

Looking at it from another side : is Achilles pos 
sible side by side with powder and lead? Or is the 
Iliad at all compatible with the printing press and 
steam press? Does not singing and reciting and the 
muses necessarily go out of existence with the ap 
pearance of the printer s bar, and do not, therefore, 
disappear the prerequisites of epic poetry? 

tt" f tb? fi ffirultY fc T? nt * n ff ras P m g the idea that 
Greek art and epos are bound up with certain forms 
of_social development^ It rather lies in understand- 
im^jwhy they still constitute with us a source of 
aesthetic enjoyment and in certain respects pre- 

1 The site of the "Times" building in London. K. K. 


vail as the ^tandard and model beypnd_attainment. 
A man can not become a child again unless he 
becomes childish. But does he not enjoy the artless 
ways of the child and must he not strive to repro 
duce its truth on a higher plane? Is not the charac 
ter of every epoch revived perfectly true to nature 
in child nature? Why should the social childhood 
of mankind, where it had obtained its most beauti 
ful development, not exert an eternal charm as an 
age that will never return? There are ill-bred chil 
dren and precocious children. Many of the ancient 
nations belong to the latter class. The Greeks were 
normal children. The charm their art has for us 
does not conflict with the primitive character oLthe 
social order fjx^mj^hich it had sprung! IHisjraiher 
the product ofjhe latter^and is rather due to the jact 
that the unripe social conditions under which the 
art arose atuLjinder jwhich alone it could aj>j>ear 
can never return. 

(End of Manuscript.) 



Marx, Karl 
175 A contribution to the 

critique of political economy. 
1904. Translated from the 2d German